S.Amdt. 579Senate108th Congress (2003-2005)
S.Amdt. 579
Sponsored by 
Sen. Mary L. Landrieu (D-LA)
Sen. Mary L. Landrieu (D-LA)Submitted May 14, 2003
Text
Submitted
This amendment's own text couldn't be picked out of its Congressional Record passage, so the passage is shown in full.
TEXT OF AMENDMENTS
SA 544. Mr. KENNEDY (for himself, Mr. Daschle, Mr. Bingaman, Mr.
Durbin, Mr. Reed, Mrs. Clinton, Ms. Cantwell, Mr. Sarbanes, Mr. Levin,
Mrs. Murray, Mr. Rockefeller, Mr. Kerry, Mr. Baucus, Mr. Schumer, Mr.
Dodd, and Mr. Corzine) submitted an amendment intended to be proposed
by him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; as follows:
At the end, add the following:
TITLE--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
SEC. ____01. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT
COMPENSATION ACT OF 2002.
(a) In General.--Section 208 of the Temporary Extended
Unemployment Compensation Act of 2002 (Public Law 107-147;
116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3),
is amended--
(1) in subsection (a)(2), by striking ``before June 1'' and
inserting ``on or before November 30'';
(2) in subsection (b)(1), by striking ``May 31, 2003'' and
inserting ``November 30, 2003'';
(3) in subsection (b)(2)--
(A) in the heading, by striking ``may 31, 2003'' and
inserting ``november 30, 2003''; and
(B) by striking ``May 31, 2003'' and inserting ``November
30, 2003''; and
(4) in subsection (b)(3), by striking ``August 30, 2003''
and inserting ``February 28, 2004''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 21).
SEC. ____02. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY
EXTENDED UNEMPLOYMENT COMPENSATION.
(a) Entitlement to Additional Weeks.--
(1) In general.--Paragraph (1) of section 203(b) of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 28) is amended--
(A) in subparagraph (A), by striking ``50 percent'' and
inserting ``100 percent''; and
(B) in subparagraph (B), by striking ``13 times'' and
inserting ``26 times''.
(2) Repeal of restriction on augmentation during
transitional period.--Section 208(b) of the Temporary
Extended Unemployment Compensation Act of 2002 (Public Law
107-147), as amended by Public Law 108-1 (117 Stat. 3) and
section ____01(a), is amended--
(A) in paragraph (1)--
(i) by striking ``paragraphs (2) and (3)'' and inserting
``paragraph (2)''; and
(ii) by inserting before the period at the end the
following: ``, including such compensation payable by reason
of amounts deposited in such account after such date pursuant
to the application of subsection (c) of such section'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2).
(3) Extension of transition limitation.--Section 208(b)(2)
of the Temporary Extended Unemployment Compensation Act of
2002 (Public Law 107-147), as amended by Public Law 108-1
(117 Stat. 3) and section ____01(a)(4) and as redesignated by
paragraph (2), is amended by striking ``February 28, 2004''
and inserting ``May 29, 2004''.
(4) Conforming amendment for augmented benefits.--Section
203(c)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by
striking ``the amount originally established in such account
(as determined under subsection (b)(1))'' and inserting ``7
times the individual's average weekly benefit amount for the
benefit year''.
(b) Effective Date and Application.--
(1) In general.--The amendments made by subsection (a)
shall apply with respect to
[[Page S6267]]
weeks of unemployment beginning on or after the date of
enactment this Act.
(2) TEUC-X amounts deposited in account prior to date of
enactment deemed to be the additional teuc amounts provided
by this section.--In applying the amendments made by
subsection (a) under the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26),
the Secretary of Labor shall deem any amounts deposited into
an individual's temporary extended unemployment compensation
account by reason of section 203(c) of such Act (commonly
known as ``TEUC-X amounts'') prior to the date of enactment
of this Act to be amounts deposited in such account by reason
of section 203(b) of such Act, as amended by subsection (a)
(commonly known as ``TEUC amounts'').
(3) Application to exhaustees and current beneficiaries.--
(A) Exhaustees.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) who exhausted such individual's rights to such
compensation (by reason of the payment of all amounts in such
individual's temporary extended unemployment compensation
account) before such date,
such individual's eligibility for any additional weeks of
temporary extended unemployment compensation by reason of the
amendments made by subsection (a) shall apply with respect to
weeks of unemployment beginning on or after the date of
enactment of this Act.
(B) Current beneficiaries.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) as to whom the condition described in subparagraph
(A)(ii) does not apply,
such individual shall be eligible for temporary extended
unemployment compensation (in accordance with the provisions
of the Temporary Extended Unemployment Compensation Act of
2002, as amended by subsection (a)) with respect to weeks of
unemployment beginning on or after the date of enactment of
this Act.
(4) Redetermination of eligibility for augmented amounts
for individuals for whom such a determination was made prior
to the date of enactment.--Any determination of whether the
individual's State is in an extended benefit period under
section 203(c) of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28)
made prior to the date of enactment of this Act shall be
disregarded and the determination under such section shall be
made as follows:
(A) Individuals who exhausted all teuc and teuc-x amounts
prior to the date of enactment.--In the case of an individual
whose temporary extended unemployment account has, prior to
the date of enactment of this Act, been both augmented under
such section 203(c) and exhausted of all amounts by which it
was so augmented, the determination shall be made as of such
date of enactment.
(B) All other individuals.--In the case of an individual
who is not described in subparagraph (A), the determination
shall be made at the time that the individual's account
established under such section 203, as amended by subsection
(a), is exhausted.
(5) No effect on provisions related to displaced airline
related workers.--The amendments made by this section and
section ____01 shall have no effect on the provisions of
section 4002 of the Emergency Wartime Supplemental
Appropriations Act, 2003 (Public Law 108-11).
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
SEC. ____11. FEDERAL-STATE AGREEMENTS.
(a) In General.--Any State which desires to do so may enter
into and participate in an agreement under this title with
the Secretary of Labor (in this title referred to as the
``Secretary''). Any State which is a party to an agreement
under this title may, upon providing 30 days' written notice
to the Secretary, terminate such agreement.
(b) Provisions of Agreement.--
(1) In general.--Subject to paragraph (3), any agreement
under subsection (a) shall provide that the State agency of
the State, in addition to any amounts of regular compensation
to which an individual may be entitled under the State law,
shall make payments of temporary enhanced regular
unemployment compensation to an individual in an amount and
to the extent that the individual would be entitled to
regular compensation if the State law were applied with the
modifications described in paragraph (2).
(2) Modifications described.--The modifications described
in this paragraph are as follows:
(A) In the case of an individual who is not eligible for
regular compensation under the State law because of the use
of a definition of base period that does not count wages
earned in the most recently completed calendar quarter, then
eligibility for compensation shall be determined by applying
a base period ending at the close of the most recently
completed calendar quarter.
(B) In the case of an individual who is not eligible for
regular compensation under the State law because such
individual does not meet requirements relating to
availability for work, active search for work, or refusal to
accept work, because such individual is seeking, or is
available for, less than full-time work, then compensation
shall not be denied by such State to an otherwise eligible
individual who seeks less than full-time work or fails to
accept full-time work.
(3) Reduction of amounts of regular compensation available
for individuals who sought part-time work or failed to accept
full-time work.--Any agreement under subsection (a) shall
provide that the State agency of the State shall reduce the
amount of regular compensation available to an individual who
has received temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in paragraph (2)(B) by the amount of
such temporary enhanced regular unemployment compensation.
(c) Coordination Rule.--The modifications described in
subsection (b)(2) shall also apply in determining the amount
of benefits payable under any Federal law to the extent that
those benefits are determined by reference to regular
compensation payable under the State law of the State
involved.
SEC. ____12. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS
TITLE.
(a) General Rule.--There shall be paid to each State which
has entered into an agreement under this title an amount
equal to--
(1) 100 percent of any temporary enhanced regular
unemployment compensation; and
(2) 100 percent of any regular compensation which is paid
to individuals by such State by reason of the fact that its
State law contains provisions comparable to the modifications
described in subparagraphs (A) and (B) of section
____11(b)(2), but only to the extent that those amounts
would, if such amounts were instead payable by virtue of the
State law's being deemed to be so modified pursuant to
section ____11(b)(1), have been reimbursable under paragraph
(1).
(b) Determination of Amount.--Sums under subsection (a)
payable to any State by reason of such State having an
agreement under this title shall be payable, either in
advance or by way of reimbursement (as may be determined by
the Secretary), in such amounts as the Secretary estimates
the State will be entitled to receive under this title for
each calendar month, reduced or increased, as the case may
be, by any amount by which the Secretary finds that the
Secretary's estimates for any prior calendar month were
greater or less than the amounts which should have been paid
to the State. Such estimates may be made on the basis of such
statistical, sampling, or other method as may be agreed upon
by the Secretary and the State agency of the State involved.
SEC. ____13. FINANCING PROVISIONS.
(a) In General.--Funds in the extended unemployment
compensation account (as established by section 905(a) of the
Social Security Act (42 U.S.C. 1105(a))), and the Federal
unemployment account (as established by section 904(g) of
such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund
(as established by section 904(a) of such Act (42 U.S.C.
1104(a))) shall be used for the making of payments to States
having agreements entered into under this title.
(b) Certification.--The Secretary shall from time to time
certify to the Secretary of the Treasury for payment to each
State the sums which are payable to such State under this
title. The Secretary of the Treasury, prior to audit or
settlement by the General Accounting Office, shall make
payments to the State in accordance with such certification
by transfers from the extended unemployment compensation
account (as so established), or, to the extent that there are
insufficient funds in that account, from the Federal
unemployment account, to the account of such State in the
Unemployment Trust Fund (as so established).
(c) Assistance to States.--There are appropriated out of
the employment security administration account of the
Unemployment Trust Fund (as established by section 901(a) of
the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to
reimburse States for the costs of the administration of
agreements under this title (including any improvements in
technology in connection therewith) and to provide
reemployment services to unemployment compensation claimants
in States having agreements under this title. Each State's
share of the amount appropriated by the preceding sentence
shall be determined by the Secretary according to the factors
described in section 302(a) of the Social Security Act (42
U.S.C. 502(a)) and certified by the Secretary to the
Secretary of the Treasury.
(d) Appropriations for Certain Payments.--There are
appropriated from the general fund of the Treasury, without
fiscal year limitation, to the extended unemployment
compensation account (as so established) of the Unemployment
Trust Fund (as so established) such sums as the Secretary
estimates to be necessary to make the payments under this
section in respect of--
(1) compensation payable under chapter 85 of title 5,
United States Code; and
(2) compensation payable on the basis of services to which
section 3309(a)(1) of the Internal Revenue Code of 1986
applies.
Amounts appropriated pursuant to the preceding sentence shall
not be required to be repaid.
SEC. ____14. DEFINITIONS.
For purposes of this title, the terms ``compensation'',
``base period'', ``regular compensation'', ``State'', ``State
agency'', ``State law'', and ``week'' have the respective
meanings given such terms under section 205 of
[[Page S6268]]
the Federal-State Extended Unemployment Compensation Act of
1970.
SEC. ____15. APPLICABILITY.
(a) In General.--Except as provided in subsection (b), an
agreement entered into under this title shall apply to weeks
of unemployment--
(1) beginning after the date on which such agreement is
entered into; and
(2) ending before July 1, 2004.
(b) Phase-Out of TERUC.--
(1) In general.--Subject to paragraph (2), in the case of
an individual who has established eligibility for temporary
enhanced regular unemployment compensation, but who has not
exhausted all rights to such compensation, as of the last day
of the week ending before July 1, 2004, such compensation
shall continue to be payable to such individual for any week
beginning after such date for which the individual meets the
eligibility requirements of this title.
(2) Limitation.--No compensation shall be payable by reason
of paragraph (1) for any week beginning after December 31,
2004.
SEC. ____16. COORDINATION WITH THE TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION ACT OF 2002.
(a) In General.--The Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended--
(1) in section 202(b)(1), by inserting ``, and who have
exhausted all rights to temporary enhanced regular
unemployment compensation'' before the semicolon at the end;
(2) in section 202(b)(2), by inserting ``, temporary
enhanced regular unemployment compensation,'' after ``regular
compensation'';
(3) in section 202(c), by inserting ``(or, as the case may
be, such individual's rights to temporary enhanced regular
unemployment compensation)'' after ``State law'' in the
matter preceding paragraph (1);
(4) in section 202(c)(1), by inserting ``and no payments of
temporary enhanced regular unemployment compensation can be
made'' after ``under such law'';
(5) in section 202(d)(1), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
(including dependents' allowances) payable to such individual
for such a week,'' after ``total unemployment'';
(6) in section 202(d)(2)(A), by inserting ``, or, as the
case may be, to temporary enhanced regular unemployment
compensation,'' after ``State law'';
(7) in section 203(b)(1)(A), by inserting ``plus the amount
of any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``under
such law''; and
(8) in section 203(b)(2), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``total
unemployment''.
(b) Amount of TEUC Offset by Amount of TERUC.--Section
203(b)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting a comma; and
(2) by adding at the end the following:
``minus the number of weeks in which the individual was
entitled to temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in section ____11(b)(2)(A) of the
________ Act of 2003 (relating to the alternative base
period) multiplied by the individual's average weekly benefit
amount for the benefit year.''.
(c) Temporary Enhanced Regular Unemployment Compensation
Defined.--Section 207 of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended to read as follows:
``SEC. 207. DEFINITIONS.
``In this title:
``(1) General definitions.--The terms `compensation',
`regular compensation', `extended compensation', `additional
compensation', `benefit year', `base period', `State', `State
agency', `State law', and `week' have the respective meanings
given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note).
``(2) Temporary enhanced regular unemployment
compensation.--The term `temporary enhanced regular
unemployment compensation' means temporary enhanced regular
unemployment benefits payable under title II of the ________
Act of 2003.''.
Subtitle C--Railroad Unemployment Insurance
SEC. ____21. TEMPORARY INCREASE IN EXTENDED UNEMPLOYMENT
BENEFITS UNDER THE RAILROAD UNEMPLOYMENT
INSURANCE ACT.
Section 2(c)(2) of the Railroad Unemployment Insurance Act
(45 U.S.C. 352(c)(2)) is amended by adding at the end the
following:
``(D) Temporary increase in extended unemployment
benefits.--
``(i) Employees with 10 or more years of service.--Subject
to clause (iii), in the case of an employee who has 10 or
more years of service (as so defined), with respect to
extended unemployment benefits--
``(I) subparagraph (A) shall be applied by substituting
``130 days of unemployment'' for ``65 days of unemployment'';
and
``(II) subparagraph (B) shall be applied by inserting
``(or, in the case of unemployment benefits, 13 consecutive
14-day periods'' after ``7 consecutive 14-day periods''.
``(ii) Employees with less than 10 years of service.--
Subject to clause (iii), in the case of an employee who has
less than 10 years of service (as so defined), with respect
to extended unemployment benefits, this paragraph shall apply
to such an employee in the same manner as this paragraph
would apply to an employee described in clause (i) if such
clause had not been enacted.
``(iii) Application.--The provisions of clauses (i) and
(ii) shall apply to--
``(I) an employee who received normal benefits for days of
unemployment under this Act during the period beginning on
July 1, 2002, and ending on November 30, 2003; and
``(II) days of unemployment beginning on or after the date
of enactment of ____ Act of 2003.''.
Subtitle D--Revenue Provision
SEC. ____31. ELIMINATION OF ACCELERATION OF TOP RATE
REDUCTION IN INDIVIDUAL INCOME TAX RATES.
(a) In General.--Notwithstanding the amendment made by
section 102(a) of this Act, in lieu of the percent specified
in the last column of the table in paragraph (2) of section
1(i) of the Internal Revenue Code of 1986, as amended by such
section 102(a), for taxable years beginning during calendar
years 2003, 2004, and 2005, the following percentages shall
be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(b) Effective Date.--Subsection (a) shall take effect on
the date of enactment of this Act.
______
SA 545. Mr. KENNEDY (for himself, Mr. Graham of Florida, Mr.
Rockefeller, Mr. Johnson, and Mr. Corzine) submitted an amendment
intended to be proposed by him to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; which was ordered to lie on the table;
as follows:
At the end of subtitle C of title V, add the following:
SEC. ____. REPEAL OF PARTIAL EXCLUSION OF DIVIDENDS AND
ELIMINATION OF ACCELERATION OF TOP RATE
REDUCTION IN INDIVIDUAL INCOME TAX RATES.
(a) Repeal of Partial Exclusion of Dividends.--Section 201
of this Act, and the amendments made by such section, are
repealed.
(b) Elimination of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar years 2003, 2004, and 2005, the following
percentages shall be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(c) Effective Date.--Subsection (a) and (b) shall take
effect on the date of enactment of this Act.
______
SA 546. Mr. KENNEDY submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V add the
following:
SEC. ____. REPEAL OF PARTIAL EXCLUSION OF DIVIDENDS AND
ELIMINATION OF ACCELERATION OF TOP RATE
REDUCTION IN INDIVIDUAL INCOME TAX RATES.
(a) Repeal of Partial Exclusion of Dividends.--Section 201
of this Act, and the amendments made by such section, are
repealed.
(b) Elimination of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar years 2003, 2004, and 2005, the following
percentages shall be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(c) Effective Date.--Subsection (a) and (b) shall take
effect on the date of enactment of this Act.
______
SA 547. Mr. KENNEDY submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V add the
following:
SEC. ____. REPEAL OF PARTIAL EXCLUSION OF DIVIDENDS AND
ELIMINATION OF ACCELERATION OF TOP RATE
REDUCTION IN INDIVIDUAL INCOME TAX RATES.
(a) Repeal of Partial Exclusion of Dividends.--Section 201
of this Act, and the amendments made by such section, are
repealed.
[[Page S6269]]
(b) Elimination of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar years 2003, 2004, and 2005, the following
percentages shall be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(c) Effective Date.--Subsection (a) and (b) shall take
effect on the date of enactment of this Act.
______
SA 548. Mr. KENNEDY submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V add the
following:
SEC. ____. ELIMINATION OF ACCELERATION OF TOP RATE REDUCTION
IN INDIVIDUAL INCOME TAX RATES.
(a) In General.--Notwithstanding the amendment made by
section 102(a) of this Act, in lieu of the percent specified
in the last column of the table in paragraph (2) of section
1(i) of the Internal Revenue Code of 1986, as amended by such
section 102(a), for taxable years beginning during calendar
years 2003, 2004, and 2005, the following percentages shall
be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(b) Effective Date.--Subsection (a) shall take effect on
the date of enactment of this Act.
______
SA 549. Mr. BAUCUS submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide reconciliation pursuant to section
201 of the concurrent resolution on the budget for fiscal year 2004;
which was ordered to lie on the table; as follows:
On page 2, strike line 13 and insert:
(b) Increase in Penalties.--Section 7206(a) (as
redesignated by subsection (a)) is amended--
(1) by striking ``$100,000'' and inserting ``$250,000'',
(2) by striking ``$500,000'' and inserting ``$1,000,000'',
and
(3) by striking ``3 years'' and inserting ``5 years''.
(c) Effective Date.--The amendments made by
______
SA 550. Mr. WARNER (for himself, Mr. Allen, and Ms. Collins)
submitted an amendment intended to be proposed by him to the bill S.
1054, to provide reconciliation pursuant to section 201 of the
concurrent resolution on the budget for fiscal year 2004; as follows
At the end of subtitle C of title V, insert the following:
SEC. ____. EXPANSION OF ABOVE-THE-LINE DEDUCTION FOR CERTAIN
EXPENSES OF ELEMENTARY AND SECONDARY SCHOOL
TEACHERS.
(a) In General.--Subparagraph (D) of section 62(a)(2)
(relating to certain trade and business deductions of
employees) is amended to read as follows:
``(D) Certain expenses of elementary and secondary school
teachers.--The deductions allowed by section 162 which
consist of expenses, not in excess of $500, paid or incurred
by an eligible educator--
``(i) by reason of the participation of the educator in
professional development courses related to the curriculum
and academic subjects in which the educator provides
instruction or to the students for which the educator
provides instruction, and
``(ii) in connection with books, supplies (other than
nonathletic supplies for courses of instruction in health or
physical education), computer equipment (including related
software and services) and other equipment, and supplementary
materials used by the eligible educator in the classroom.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
______
SA 551. Mr. SCHUMER (for himself and Mrs. Clinton) submitted an
amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. EXPANSION OF DESIGNATED RENEWAL COMMUNITY AREA
BASED ON 2000 CENSUS DATA.
(a) Renewal Communities.--
(1) In general.--Section 1400E (relating to designation of
renewal communities) is amended by adding at the end the
following new subsection:
``(g) Expansion of Designated Areas.--
``(1) Expansion based on 2000 Census.--At the request of
the nominating entity with respect to a renewal community,
the Secretary of Housing and Urban Development may expand the
area of a renewal community to include any census tract--
``(A) which, at the time such community was nominated, met
the requirements of this section for inclusion in such
community but for the failure of such tract to meet 1 or more
of the population and poverty rate requirements of this
section using 1990 census data, and
``(B) which meets all failed population and poverty rate
requirements of this section using 2000 census data.
``(2) Expansion to certain areas which do not meet
population requirements.--
``(A) In general.--At the request of 1 or more local
governments and the State or States in which an area
described in subparagraph (B) is located, the Secretary of
Housing and Urban Development may expand a designated area to
include such area.
``(B) Area.--An area is described in this subparagraph if--
``(i) the area is adjacent to at least 1 other area
designated as a renewal community,
``(ii) the area has a population less than the population
required under subsection (c)(2)(C), and
``(iii) the area meets the requirements of subparagraphs
(A) and (B) of subsection (c)(2) and subparagraph (A) of
subsection (c)(3).
``(3) Applicability.--Any expansion of a renewal community
under this section shall take effect as provided in
subsection (b).''.
(2) Effective date.--The amendment made by this subsection
shall take effect as if included in the amendments made by
section 101 of the Community Renewal Tax Relief Act of 2000.
(b) Change of Top Income Rate.--
(1) In general.--The table in paragraph (2) of section 1(i)
(relating to reductions in rates after June 30, 2001), as
amended by section 102 of this Act, is amended by striking
``35.0%'' in the last column and inserting ``37.6%''.
(2) Effective date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
(3) Application of EGTRRA.--The amendment made by this
subsection shall be subject to title IX of the Economic
Growth and Tax Relief Reconciliation Act of 2001 to the same
extent and in the same manner as the provision of such Act to
which such amendment relates.
______
SA 552. Mr. Schumer (for himself and Mrs. Clinton) submitted an
amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. EXPANSION OF DESIGNATED RENEWAL COMMUNITY AREA
BASED ON 2000 CENSUS DATA.
(a) In General.--Section 1400E of the Internal Revenue Code
of 1986 (relating to designation of renewal communities) is
amended by adding at the end the following new subsection:
``(g) Expansion of Designated Areas.--
``(1) Expansion based on 2000 census.--At the request of
the nominating entity with respect to a renewal community,
the Secretary of Housing and Urban Development may expand the
area of a renewal community to include any census tract--
``(A) which, at the time such community was nominated, met
the requirements of this section for inclusion in such
community but for the failure of such tract to meet 1 or more
of the population and poverty rate requirements of this
section using 1990 census data, and
``(B) which meets all failed population and poverty rate
requirements of this section using 2000 census data.
``(2) Expansion to certain areas which do not meet
population requirements.--
``(A) In general.--At the request of 1 or more local
governments and the State or States in which an area
described in subparagraph (B) is located, the Secretary of
Housing and Urban Development may expand a designated area to
include such area.
``(B) Area.--An area is described in this subparagraph if--
``(i) the area is adjacent to at least 1 other area
designated as a renewal community,
``(ii) the area has a population less than the population
required under subsection (c)(2)(C), and
``(iii) the area meets the requirements of subparagraphs
(A) and (B) of subsection (c)(2) and subparagraph (A) of
subsection (c)(3).
``(3) Applicability.--Any expansion of a renewal community
under this section shall take effect as provided in
subsection (b).''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect as if included in the amendments made by
section 101 of the Community Renewal Tax Relief Act of 2000.
______
SA 553. Mr. SCHUMER (for himself, Mr. Corzine, Mrs. Boxer, Mrs.
Feinstein, Mr. Edwards, and Mr. Kerry) submitted an amendment intended
to be proposed by him to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; which was ordered to lie on the table;
as follows:
Section 371 is amended by striking subsections (c) through
(g) and inserting the following:
[[Page S6270]]
(c) Certifications.--In order to receive a payment under
this section, the State shall provide the Secretary with
certifications that--
(1) the State's proposed uses of the funds are consistent
with subsection (b); and
(2) the State will allocate 50 percent of the funds
directly to units of general local government based on the
relative local population proportion for the State (as
defined in subsection (d)(5)) and not use the funds to
supplant State funding or revenue that the State otherwise
provides to units of general local government.
(d) Amount of Payment.--
(1) In general.--The amount of payment made to a State
under this section shall be the minimum payment amount
described in paragraph (2) plus the relative population
proportion amount described in paragraph (3).
(2) Minimum payment amount.--The minimum payment amount
described in this paragraph is--
(A) in the case of any of the several States, the District
of Columbia, or the Commonwealth of Puerto Rico, one-quarter
of 1 percent of the aggregate amount made available for
payments under this section (after the application of section
1903(x)(3) of the Social Security Act); and
(B) in the case of the United States Virgin Islands, Guam,
the Commonwealth of the Northern Mariana Islands, or American
Samoa, one-twentieth of 1 percent of such aggregate amount
(after the application of section 1903(x)(3) of the Social
Security Act).
(3) Relative population proportion amount.--The relative
population proportion amount described in this paragraph is
the product of--
(A) the aggregate amount made available for payments under
this section (after the application of section 1903(x)(3) of
the Social Security Act) minus the total of all of the
minimum payment amounts determined under paragraph (2); and
(B) the relative State population proportion (as defined in
paragraph (4)).
(4) Relative state population proportion defined.--In this
section, the term ``relative State population proportion''
means, with respect to a State, the amount equal to the
quotient of--
(A) the population of the State (as reported in the most
recent decennial census); and
(B) the total population of all States (as reported in the
most recent decennial census).
(5) Relative local population proportion defined.--In this
section, the term ``relative local population proportion''
means, with respect to a unit of general local government
within a State, the amount equal to the quotient of--
(A) the population of such unit of general local government
(as reported in the most recent decennial census); and
(B) the total population of the State (as reported in the
most recent decennial census).
(e) Appropriation.--There is authorized to be appropriated
and is appropriated for making payments under this section,
$40,000,000,000 for fiscal year 2003. Amounts appropriated
under this subsection shall remain available for expenditure
through December 31, 2004.
(f) Increased Payments To States Under the Medicaid
Program.--Section 1903 of the Social Security Act (42 U.S.C.
1396b) is amended by adding at the end the following:
``(x) Temporary Increased Payments To States.--
``(1) In general.--From the amounts made available under
paragraph (3), the Secretary shall increase payments to
States under this section for the third and fourth calendar
quarters of fiscal year 2003, each calendar quarter of fiscal
year 2004, and the first calendar quarter of fiscal year
2005.
``(2) Method of increase.--The Secretary shall determine
the appropriate method for increasing payments to States in
accordance with this subsection.
``(3) Funding.--Notwithstanding section 371(e) of the Jobs
and Growth Tax Relief Reconciliation Act of 2003, from the
amounts appropriated in such section for fiscal year 2003,
$499,999 of such amount is hereby transferred and made
available for the purpose of increasing payments to States
under this section in accordance with this subsection.
Amounts transferred under this paragraph shall remain
available for expenditure through December 31, 2004.''.
(g) Repeal.--Effective as of January 1, 2005, this section
and the amendments made by this section are repealed.
(h) Elimination of 20 Percent Partial Exclusion of
Dividends Received By Individuals.--
(1) In general.--Section 116(a)(2)(B), as added by section
201 of this Act, is amended by striking ``(20 percent in the
case of taxable years beginning after 2007)''.
(2) Nonapplication.--Subsection (g) of this section shall
not apply to the amendment made by paragraph (1).
______
SA 554. Mr. SCHUMER submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
Section 371 is amended by striking subsections (c) through
(g) inserting the following:
(c) Certifications.--In order to receive a payment under
this section, the State shall provide the Secretary with
certifications that--
(1) the State's proposed uses of the funds are consistent
with subsection (b); and
(2) the State will allocate 50 percent of the funds
directly to units of general local government based on the
relative local population proportion for the State (as
defined in subsection (d)(5)) and not use the funds to
supplant State funding or revenue that the State otherwise
provides to units of general local government.
(d) Amount of Payment.--
(1) In general.--The amount of payment made to a State
under this section shall be the minimum payment amount
described in paragraph (2) plus the relative population
proportion amount described in paragraph (3).
(2) Minimum payment amount.--The minimum payment amount
described in this paragraph is--
(A) in the case of any of the several States, the District
of Columbia, or the Commonwealth of Puerto Rico, one-third of
1 percent of the aggregate amount made available for payments
under this section (after the application of section
1903(x)(3) of the Social Security Act); and
(B) in the case of the United States Virgin Islands, Guam,
the Commonwealth of the Northern Mariana Islands, or American
Samoa, one-fifteenth of 1 percent of such aggregate amount
(after the application of section 1903(x)(3) of the Social
Security Act).
(3) Relative population proportion amount.--The relative
population proportion amount described in this paragraph is
the product of--
(A) the aggregate amount made available for payments under
this section (after the application of section 1903(x)(3) of
the Social Security Act) minus the total of all of the
minimum payment amounts determined under paragraph (2); and
(B) the relative State population proportion (as defined in
paragraph (4)).
(4) Relative state population proportion defined.--In this
section, the term ``relative State population proportion''
means, with respect to a State, the amount equal to the
quotient of--
(A) the population of the State (as reported in the most
recent decennial census); and
(B) the total population of all States (as reported in the
most recent decennial census).
(5) Relative local population proportion defined.--In this
section, the term ``relative local population proportion''
means, with respect to a unit of general local government
within a State, the amount equal to the quotient of--
(A) the population of such unit of general local government
(as reported in the most recent decennial census); and
(B) the total population of the State (as reported in the
most recent decennial census).
(e) Appropriation.--There is authorized to be appropriated
and is appropriated for making payments under this section,
$30,000,000,000 for fiscal year 2003. Amounts appropriated
under this subsection shall remain available for expenditure
through December 31, 2004.
(f) Increased Payments To States Under the Medicaid
Program.--Section 1903 of the Social Security Act (42 U.S.C.
1396b) is amended by adding at the end the following:
``(x) Temporary Increased Payments To States.--
``(1) In general.--From the amounts made available under
paragraph (3), the Secretary shall increase payments to
States under this section for the third and fourth calendar
quarters of fiscal year 2003, each calendar quarter of fiscal
year 2004, and the first calendar quarter of fiscal year
2005.
``(2) Method of increase.--The Secretary shall determine
the appropriate method for increasing payments to States in
accordance with this subsection.
``(3) Funding.--Notwithstanding section 371(e) of the Jobs
and Growth Tax Relief Reconciliation Act of 2003, from the
amounts appropriated in such section for fiscal year 2003,
$499,999 of such amount is hereby transferred and made
available for the purpose of increasing payments to States
under this section in accordance with this subsection.
Amounts transferred under this paragraph shall remain
available for expenditure through December 31, 2004.''.
(g) Repeal.--Effective as of January 1, 2005, this section
and the amendments made by this section are repealed.
(h) Revision of Partial Exclusion of Dividends Received By
Individuals.--
(1) In general.--Section 116(a)(2)(B), as added by section
201 of this Act, is amended by striking ``2007'' and
inserting ``2010''.
(2) Application of sunset.--Section 601(a) of this Act
shall apply to the amendment made by paragraph (1).
(3) Nonapplication.--Subsection (g) of this section shall
not apply to the amendment made by paragraph (1).
______
SA 555. Mr. GRASSLEY proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the end of part I of subtitle C of title III add the
following:
SEC. 335. INCREASE IN CRIMINAL MONETARY PENALTY LIMITATION
FOR THE UNDERPAYMENT OR OVERPAYMENT OF TAX DUE
TO FRAUD.
(a) In General.--Section 7206 (relating to fraud and false
statements) is amended--
[[Page S6271]]
(1) by striking ``Any person who--'' and inserting ``(a) In
General.--Any person who--'', and
(2) by adding at the end the following new subsection:
``(b) Increase in Monetary Limitation for Underpayment or
Overpayment of Tax Due To Fraud.--If any portion of any
underpayment (as defined in section 6664(a)) or overpayment
(as defined in section 6401(a)) of tax required to be shown
on a return is attributable to fraudulent action described in
subsection (a), the applicable dollar amount under subsection
(a) shall in no event be less than an amount equal to such
portion. A rule similar to the rule under section 6663(b)
shall apply for purposes of determining the portion so
attributable.''.
(b) Effective Date.--The amendments made by this section
shall apply to underpayments and overpayments attributable to
actions occurring after the date of the enactment of this
Act.
______
SA 556. Mr. DORGAN (for himself, Mr. Baucus, Mr. Conrad, and Mr.
Corzine) proposed an amendment to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; as follows:
Strike section 102.
Strike title II.
At the end of subtitle C of title V, add the following:
SEC. ____. REPEAL OF 1993 INCOME TAX INCREASE ON SOCIAL
SECURITY BENEFITS.
(a) Restoration of Prior Law Formula.--Subsection (a) of
section 86 is amended to read as follows:
``(a) In General.--Gross income for the taxable year of any
taxpayer described in subsection (b) (notwithstanding section
207 of the Social Security Act) includes social security
benefits in an amount equal to the lesser of--
``(1) one-half of the social security benefits received
during the taxable year, or
``(2) one-half of the excess described in subsection
(b)(1).''
(b) Repeal of Adjusted Base Amount.--Subsection (c) of
section 86 is amended to read as follows:
``(c) Base Amount.--For purposes of this section, the term
`base amount' means--
``(1) except as otherwise provided in this subsection,
$25,000,
``(2) $32,000 in the case of a joint return, and
``(3) zero in the case of a taxpayer who--
``(A) is married as of the close of the taxable year
(within the meaning of section 7703) but does not file a
joint return for such year, and
``(B) does not live apart from his spouse at all times
during the taxable year.''
(c) Conforming Amendments.--
(1) Subparagraph (A) of section 871(a)(3) is amended by
striking ``85 percent'' and inserting ``50 percent''.
(2)(A) Subparagraph (A) of section 121(e)(1) of the Social
Security Amendments of 1983 (Public Law 98-21) is amended--
(i) by striking ``(A) There'' and inserting ``There'';
(ii) by striking ``(i)'' immediately following ``amounts
equivalent to''; and
(iii) by striking ``, less (ii)'' and all that follows and
inserting a period.
(B) Paragraph (1) of section 121(e) of such Act is amended
by striking subparagraph (B).
(C) Paragraph (3) of section 121(e) of such Act is amended
by striking subparagraph (B) and by redesignating
subparagraph (C) as subparagraph (B).
(D) Paragraph (2) of section 121(e) of such Act is amended
in the first sentence by striking ``paragraph (1)(A)'' and
inserting ``paragraph (1)''.
(d) Maintenance of Transfers to Hospital Insurance Trust
Fund.--There are hereby appropriated to the Hospital
Insurance Trust Fund established under section 1817 of the
Social Security Act amounts equal to the reduction in
revenues to the Treasury by reason of the enactment of this
section. Amounts appropriated by the preceding sentence shall
be transferred from the general fund at such times and in
such manner as to replicate to the extent possible the
transfers which would have occurred to such Trust Fund had
this section not been enacted.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years beginning after December 31, 2003.
(2) Subsection (c)(1).--The amendment made by subsection
(c)(1) shall apply to benefits paid after December 31, 2003.
(3) Subsection (c)(2).--The amendments made by subsection
(c)(2) shall apply to tax liabilities for taxable years
beginning after December 31, 2003.
______
SA 557. Mr. SCHUMER (for himself, Mr. Biden, Mrs. Boxer, Mr. Durbin,
Ms. Cantwell, and Mr. Lieberman) submitted an amendment intended to be
proposed by him to the bill S. 1054, to provide for reconciliation
pursuant to section 201 of the concurrent resolution on the budget for
fiscal year 2004; as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. EXPANSION OF DEDUCTION FOR HIGHER EDUCATION
EXPENSES.
(a) In General.--
(1) Amount of deduction.--Subsection (b) of section 222
(relating to deduction for qualified tuition and related
expenses) is amended to read as follows:
``(b) Limitations.--
``(1) Dollar limitations.--
``(A) In general.--Except as provided in paragraph (2), the
amount allowed as a deduction under subsection (a) with
respect to the taxpayer for any taxable year shall not exceed
the applicable dollar limit.
``(B) Applicable dollar limit.--The applicable dollar limit
for any taxable year shall be determined as follows:
Applicable
``Taxable year: dollar amount:
2003......................................................$8,000 ....
2004 and thereafter......................................$12,000.....
``(2) Limitation based on modified adjusted gross income.--
``(A) In general.--The amount which would (but for this
paragraph) be taken into account under subsection (a) shall
be reduced (but not below zero) by the amount determined
under subparagraph (B).
``(B) Amount of reduction.--The amount determined under
this subparagraph equals the amount which bears the same
ratio to the amount which would be so taken into account as--
``(i) the excess of--
``(I) the taxpayer's modified adjusted gross income for
such taxable year, over
``(II) $65,000 ($130,000 in the case of a joint return),
bears to
``(ii) $15,000 ($30,000 in the case of a joint return).
``(C) Modified adjusted gross income.--For purposes of this
paragraph, the term `modified adjusted gross income' means
the adjusted gross income of the taxpayer for the taxable
year determined--
``(i) without regard to this section and sections 911, 931,
and 933, and
``(ii) after the application of sections 86, 135, 137, 219,
221, and 469.
For purposes of the sections referred to in clause (ii),
adjusted gross income shall be determined without regard to
the deduction allowed under this section.
``(D) Inflation adjustments.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, both of the dollar
amounts in subparagraph (B)(i)(II) shall be increased by an
amount equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B) thereof.
``(ii) Rounding.--If any amount as adjusted under clause
(i) is not a multiple of $50, such amount shall be rounded to
the nearest multiple of $50.''.
(2) Qualified tuition and related expenses of eligible
students.--
(A) In general.--Section 222(a) (relating to allowance of
deduction) is amended by inserting ``of eligible students''
after ``expenses''.
(B) Definition of eligible student.--Section 222(d)
(relating to definitions and special rules) is amended by
redesignating paragraphs (2) through (6) as paragraphs (3)
through (7), respectively, and by inserting after paragraph
(1) the following new paragraph:
``(2) Eligible student.--The term `eligible student' has
the meaning given such term by section 25A(b)(3).''.
(3) Effective date.--The amendments made by this subsection
shall apply to payments made in taxable years beginning after
December 31, 2002.
(b) Slower Acceleration of Top Income Rate.--
(1) In general.--The table in paragraph (2) of section 1(i)
(relating to reductions in rates after June 30, 2001), as
amended by this Act, is amended to read as follows:
------------------------------------------------------------------------
The corresponding percentages shall
be substituted for the following
``In the case of taxable years percentages:
beginning during calendar year: ------------------------------------
28% 31% 36% 39.6%
------------------------------------------------------------------------
2001............................... 27.5% 30.5% 35.5% 39.1%
2002............................... 27.0% 30.0% 35.0% 38.6%
2003............................... 25.0% 28.0% 33.0% 38.6%
2004............................... 25.0% 28.0% 33.0% 37.6%
2005............................... 25.0% 28.0% 33.0% 37.6%
2006 and thereafter................ 25.0% 28.0% 33.0% 35.0%''.
------------------------------------------------------------------------
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(c) Application of EGTRRA.--The amendment made by
subsection (b) shall be subject to title IX of the Economic
Growth and Tax Relief Reconciliation Act of 2001 to the same
extent and in the same manner as the provision of such Act to
which such amendment relates.
______
SA 558. Mr. SCHUMER (for himself, Mr. Biden, Mrs. Boxer, Mr. Durbin,
and Ms. Cantwell) submitted an amendment intended to be proposed by him
to the bill S. 1054, to provide for reconciliation pursuant to section
201 of the concurrent resolution on the budget for fiscal year 2004;
which was ordered to lie on the table; as follows:
At the end of subtitle C of title V, insert the following:
[[Page S6272]]
SEC. ____. EXPANSION OF DEDUCTION FOR HIGHER EDUCATION
EXPENSES.
(a) In General.--
(1) Amount of deduction.--Subsection (b) of section 222
(relating to deduction for qualified tuition and related
expenses) is amended to read as follows:
``(b) Limitations.--
``(1) Dollar limitations.--
``(A) In general.--Except as provided in paragraph (2), the
amount allowed as a deduction under subsection (a) with
respect to the taxpayer for any taxable year shall not exceed
the applicable dollar limit.
``(B) Applicable dollar limit.--The applicable dollar limit
for any taxable year shall be determined as follows:
Applicable
``Taxable year: dollar amount:
2003......................................................$8,000 ....
2004 and thereafter......................................$12,000.....
``(2) Limitation based on modified adjusted gross income.--
``(A) In general.--The amount which would (but for this
paragraph) be taken into account under subsection (a) shall
be reduced (but not below zero) by the amount determined
under subparagraph (B).
``(B) Amount of reduction.--The amount determined under
this subparagraph equals the amount which bears the same
ratio to the amount which would be so taken into account as--
``(i) the excess of--
``(I) the taxpayer's modified adjusted gross income for
such taxable year, over
``(II) $65,000 ($130,000 in the case of a joint return),
bears to
``(ii) $15,000 ($30,000 in the case of a joint return).
``(C) Modified adjusted gross income.--For purposes of this
paragraph, the term `modified adjusted gross income' means
the adjusted gross income of the taxpayer for the taxable
year determined--
``(i) without regard to this section and sections 911, 931,
and 933, and
``(ii) after the application of sections 86, 135, 137, 219,
221, and 469.
For purposes of the sections referred to in clause (ii),
adjusted gross income shall be determined without regard to
the deduction allowed under this section.
``(D) Inflation adjustments.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, both of the dollar
amounts in subparagraph (B)(i)(II) shall be increased by an
amount equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B) thereof.
``(ii) Rounding.--If any amount as adjusted under clause
(i) is not a multiple of $50, such amount shall be rounded to
the nearest multiple of $50.''.
(2) Qualified tuition and related expenses of eligible
students.--
(A) In general.--Section 222(a) (relating to allowance of
deduction) is amended by inserting ``of eligible students''
after ``expenses''.
(B) Definition of eligible student.--Section 222(d)
(relating to definitions and special rules) is amended by
redesignating paragraphs (2) through (6) as paragraphs (3)
through (7), respectively, and by inserting after paragraph
(1) the following new paragraph:
``(2) Eligible student.--The term `eligible student' has
the meaning given such term by section 25A(b)(3).''.
(3) Effective date.--The amendments made by this subsection
shall apply to payments made in taxable years beginning after
December 31, 2002 and before January 1, 2009.
(b) Interest on Higher Education Loans.--
(1) In general.--Subpart A of part IV of subchapter A of
chapter 1 (relating to nonrefundable personal credits) is
amended by inserting after section 25B the following new
section:
``SEC. 25C. INTEREST ON HIGHER EDUCATION LOANS.
``(a) Allowance of Credit.--In the case of an individual,
there shall be allowed as a credit against the tax imposed by
this chapter for the taxable year an amount equal to the
interest paid by the taxpayer during the taxable year on any
qualified education loan.
``(b) Maximum Credit.--
``(1) In general.--Except as provided in paragraph (2), the
credit allowed by subsection (a) for the taxable year shall
not exceed $1,500.
``(2) Limitation based on modified adjusted gross income.--
``(A) In general.--If the modified adjusted gross income of
the taxpayer for the taxable year exceeds $50,000 ($100,000
in the case of a joint return), the amount which would (but
for this paragraph) be allowable as a credit under this
section shall be reduced (but not below zero) by the amount
which bears the same ratio to the amount which would be so
allowable as such excess bears to $20,000 ($40,000 in the
case of a joint return).
``(B) Modified adjusted gross income.--The term `modified
adjusted gross income' means adjusted gross income determined
without regard to sections 911, 931, and 933.
``(C) Inflation adjustment.--In the case of any taxable
year beginning after 2003, the $50,000 and $100,000 amounts
referred to in subparagraph (A) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section (1)(f)(3) for the calendar year in which the taxable
year begins, by substituting `2002' for `1992'.
``(D) Rounding.--If any amount as adjusted under
subparagraph (C) is not a multiple of $50, such amount shall
be rounded to the nearest multiple of $50.
``(c) Dependents Not Eligible for Credit.--No credit shall
be allowed by this section to an individual for the taxable
year if a deduction under section 151 with respect to such
individual is allowed to another taxpayer for the taxable
year beginning in the calendar year in which such
individual's taxable year begins.
``(d) Limit on Period Credit Allowed.--A credit shall be
allowed under this section only with respect to interest paid
on any qualified education loan during the first 60 months
(whether or not consecutive) in which interest payments are
required. For purposes of this paragraph, any loan and all
refinancings of such loan shall be treated as 1 loan.
``(e) Definitions.--For purposes of this section--
``(1) Qualified education loan.--The term `qualified
education loan' has the meaning given such term by section
221(e)(1).
``(2) Dependent.--The term `dependent' has the meaning
given such term by section 152.
``(f) Special Rules.--
``(1) Denial of double benefit.--No credit shall be allowed
under this section for any amount taken into account for any
deduction under any other provision of this chapter.
``(2) Married couples must file joint return.--If the
taxpayer is married at the close of the taxable year, the
credit shall be allowed under subsection (a) only if the
taxpayer and the taxpayer's spouse file a joint return for
the taxable year.
``(3) Marital status.--Marital status shall be determined
in accordance with section 7703.''.
(2) Conforming amendment.--The table of sections for
subpart A of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 25B the
following new item:
``Sec. 25C. Interest on higher education loans.''.
(3) Effective date.--The amendments made by this subsection
shall apply to any qualified education loan (as defined in
section 25C(e)(1) of the Internal Revenue Code of 1986, as
added by this section) incurred on, before, or after the date
of the enactment of this Act, but only with respect to any
loan interest payment due after December 31, 2002 and before
January 1, 2009.
(c) Elimination of 20 Percent Dividend Exclusion.--
(1) In general.--Subparagraph (B) of section 116(a)(2)
(relating to partial exclusion of received by individuals),
as added by section 201 of this Act, is amended by striking
``(20 percent in the case of taxable years beginning after
2007)''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31,
2003.
______
SA 559. Mr. BURNS (for himself and Mr. Rockefeller) submitted an
amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
At the end of subtitle C of title V, add the following:
SEC. ____. EXPENSING OF BROADBAND INTERNET ACCESS
EXPENDITURES.
(a) In General.--Part VI of subchapter B of chapter 1
(relating to itemized deductions for individuals and
corporations) is amended by inserting after section 190 the
following new section:
``SEC. 191. BROADBAND EXPENDITURES.
``(a) Treatment of Expenditures.--
``(1) In general.--A taxpayer may elect to treat any
qualified broadband expenditure which is paid or incurred by
the taxpayer as an expense which is not chargeable to capital
account. Any expenditure which is so treated shall be allowed
as a deduction.
``(2) Election.--An election under paragraph (1) shall be
made at such time and in such manner as the Secretary may
prescribe by regulation.
``(b) Qualified Broadband Expenditures.--For purposes of
this section--
``(1) In general.--The term `qualified broadband
expenditure' means, with respect to any taxable year, any
direct or indirect costs incurred and properly taken into
account with respect to the purchase or installation of
qualified equipment (including any upgrades thereto),
together with any direct or indirect costs incurred and
properly taken into account with respect to the connection of
such qualified equipment to any qualified subscriber, but
only if such costs are incurred after December 31, 2003, and
before January 1, 2005.
``(2) Certain satellite expenditures excluded.--Such term
shall not include any costs incurred with respect to the
launching of any satellite equipment.
``(3) Leased equipment.--Such term shall include so much of
the purchase price paid by the lessor of equipment subject to
a lease described in subsection (c)(2)(B) as is attributable
to expenditures incurred by the lessee which would otherwise
be described in paragraph (1).
[[Page S6273]]
``(4) Limitation with regard to current generation
broadband services.--Only 50 percent of the amounts taken
into account under paragraph (1) with respect to qualified
equipment through which current generation broadband services
are provided shall be treated as qualified broadband
expenditures.
``(c) When Expenditures Taken Into Account.--For purposes
of this section--
``(1) In general.--Qualified broadband expenditures with
respect to qualified equipment shall be taken into account
with respect to the first taxable year in which--
``(A) current generation broadband services are provided
through such equipment to qualified subscribers, or
``(B) next generation broadband services are provided
through such equipment to qualified subscribers.
``(2) Limitation.--
``(A) In general.--Qualified expenditures shall be taken
into account under paragraph (1) only with respect to
qualified equipment--
``(i) the original use of which commences with the
taxpayer, and
``(ii) which is placed in service,
after December 31, 2003.
``(B) Sale-leasebacks.--For purposes of subparagraph (A),
if property--
``(i) is originally placed in service after December 31,
2003, by any person, and
``(ii) sold and leased back by such person within 3 months
after the date such property was originally placed in
service,
such property shall be treated as originally placed in
service not earlier than the date on which such property is
used under the leaseback referred to in clause (ii).
``(d) Special Allocation Rules.--
``(1) Current generation broadband services.--For purposes
of determining the amount of qualified broadband expenditures
under subsection (a)(1) with respect to qualified equipment
through which current generation broadband services are
provided, if the qualified equipment is capable of serving
both qualified subscribers and other subscribers, the
qualified broadband expenditures shall be multiplied by a
fraction--
``(A) the numerator of which is the sum of the number of
potential qualified subscribers within the rural areas and
the underserved areas which the equipment is capable of
serving with current generation broadband services, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with current generation broadband
services.
``(2) Next generation broadband services.--For purposes of
determining the amount of qualified broadband expenditures
under subsection (a)(1) with respect to qualified equipment
through which next generation broadband services are
provided, if the qualified equipment is capable of serving
both qualified subscribers and other subscribers, the
qualified expenditures shall be multiplied by a fraction--
``(A) the numerator of which is the sum of--
``(i) the number of potential qualified subscribers within
the rural areas and underserved areas, plus
``(ii) the number of potential qualified subscribers within
the area consisting only of residential subscribers not
described in clause (i),
which the equipment is capable of serving with next
generation broadband services, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with next generation broadband services.
``(e) Definitions.--For purposes of this section--
``(1) Antenna.--The term `antenna' means any device used to
transmit or receive signals through the electromagnetic
spectrum, including satellite equipment.
``(2) Cable operator.--The term `cable operator' has the
meaning given such term by section 602(5) of the
Communications Act of 1934 (47 U.S.C. 522(5)).
``(3) Commercial mobile service carrier.--The term
`commercial mobile service carrier' means any person
authorized to provide commercial mobile radio service as
defined in section 20.3 of title 47, Code of Federal
Regulations.
``(4) Current generation broadband service.--The term
`current generation broadband service' means the transmission
of signals at a rate of at least 1,000,000 bits per second to
the subscriber and at least 128,000 bits per second from the
subscriber.
``(5) Multiplexing or demultiplexing.--The term
`multiplexing' means the transmission of 2 or more signals
over a single channel, and the term `demultiplexing' means
the separation of 2 or more signals previously combined by
compatible multiplexing equipment.
``(6) Next generation broadband service.--The term `next
generation broadband service' means the transmission of
signals at a rate of at least 22,000,000 bits per second to
the subscriber and at least 5,000,000 bits per second from
the subscriber.
``(7) Nonresidential subscriber.--The term `nonresidential
subscriber' means any person who purchases broadband services
which are delivered to the permanent place of business of
such person.
``(8) Open video system operator.--The term `open video
system operator' means any person authorized to provide
service under section 653 of the Communications Act of 1934
(47 U.S.C. 573).
``(9) Other wireless carrier.--The term `other wireless
carrier' means any person (other than a telecommunications
carrier, commercial mobile service carrier, cable operator,
open video system operator, or satellite carrier) providing
current generation broadband services or next generation
broadband service to subscribers through the radio
transmission of energy.
``(10) Packet switching.--The term `packet switching' means
controlling or routing the path of any digitized transmission
signal which is assembled into packets or cells.
``(11) Provider.--The term `provider' means, with respect
to any qualified equipment--
``(A) a cable operator,
``(B) a commercial mobile service carrier,
``(C) an open video system operator,
``(D) a satellite carrier,
``(E) a telecommunications carrier, or
``(F) any other wireless carrier,
providing current generation broadband services or next
generation broadband services to subscribers through such
qualified equipment.
``(12) Provision of services.--A provider shall be treated
as providing services to 1 or more subscribers if--
``(A) such a subscriber has been passed by the provider's
equipment and can be connected to such equipment for a
standard connection fee,
``(B) the provider is physically able to deliver current
generation broadband services or next generation broadband
services, as applicable, to such a subscriber without making
more than an insignificant investment with respect to such
subscriber,
``(C) the provider has made reasonable efforts to make such
subscribers aware of the availability of such services,
``(D) such services have been purchased by 1 or more such
subscribers, and
``(E) such services are made available to such subscribers
at average prices comparable to those at which the provider
makes available similar services in any areas in which the
provider makes available such services.
``(13) Qualified equipment.--
``(A) In general.--The term `qualified equipment' means
equipment which provides current generation broadband
services or next generation broadband services--
``(i) at least a majority of the time during periods of
maximum demand to each subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no deduction is allowed under
subsection (a)(1).
``(B) Only certain investment taken into account.--Except
as provided in subparagraph (C) or (D), equipment shall be
taken into account under subparagraph (A) only to the extent
it--
``(i) extends from the last point of switching to the
outside of the unit, building, dwelling, or office owned or
leased by a subscriber in the case of a telecommunications
carrier,
``(ii) extends from the customer side of the mobile
telephone switching office to a transmission/receive antenna
(including such antenna) owned or leased by a subscriber in
the case of a commercial mobile service carrier,
``(iii) extends from the customer side of the headend to
the outside of the unit, building, dwelling, or office owned
or leased by a subscriber in the case of a cable operator or
open video system operator, or
``(iv) extends from a transmission/receive antenna
(including such antenna) which transmits and receives signals
to or from multiple subscribers, to a transmission/receive
antenna (including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a satellite carrier or other wireless carrier,
unless such other wireless carrier is also a
telecommunications carrier.
``(C) Packet switching equipment.--Packet switching
equipment, regardless of location, shall be taken into
account under subparagraph (A) only if it is deployed in
connection with equipment described in subparagraph (B) and
is uniquely designed to perform the function of packet
switching for current generation broadband services or next
generation broadband services, but only if such packet
switching is the last in a series of such functions performed
in the transmission of a signal to a subscriber or the first
in a series of such functions performed in the transmission
of a signal from a subscriber.
``(D) Multiplexing and demultiplexing equipment.--
Multiplexing and demultiplexing equipment shall be taken into
account under subparagraph (A) only to the extent it is
deployed in connection with equipment described in
subparagraph (B) and is uniquely designed to perform the
function of multiplexing and demultiplexing packets or cells
of data and making associated application adaptions, but only
if such multiplexing or demultiplexing equipment is located
between packet switching equipment described in subparagraph
(C) and the subscriber's premises.
``(14) Qualified subscriber.--The term `qualified
subscriber' means--
``(A) with respect to the provision of current generation
broadband services--
``(i) any nonresidential subscriber maintaining a permanent
place of business in a rural area or underserved area, or
[[Page S6274]]
``(ii) any residential subscriber residing in a dwelling
located in a rural area or underserved area which is not a
saturated market, and
``(B) with respect to the provision of next generation
broadband services--
``(i) any nonresidential subscriber maintaining a permanent
place of business in a rural area or underserved area, or
``(ii) any residential subscriber.
``(15) Residential subscriber.--The term `residential
subscriber' means any individual who purchases broadband
services which are delivered to such individual's dwelling.
``(16) Rural area.--The term `rural area' means any census
tract which--
``(A) is not within 10 miles of any incorporated or census
designated place containing more than 25,000 people, and
``(B) is not within a county or county equivalent which has
an overall population density of more than 500 people per
square mile of land.
``(17) Rural subscriber.--The term `rural subscriber' means
any residential subscriber residing in a dwelling located in
a rural area or nonresidential subscriber maintaining a
permanent place of business located in a rural area.
``(18) Satellite carrier.--The term `satellite carrier'
means any person using the facilities of a satellite or
satellite service licensed by the Federal Communications
Commission and operating in the Fixed-Satellite Service under
part 25 of title 47 of the Code of Federal Regulations or the
Direct Broadcast Satellite Service under part 100 of title 47
of such Code to establish and operate a channel of
communications for distribution of signals, and owning or
leasing a capacity or service on a satellite in order to
provide such point-to-multipoint distribution.
``(19) Saturated market.--The term `saturated market' means
any census tract in which, as of the date of the enactment of
this section--
``(A) current generation broadband services have been
provided by a single provider to 85 percent or more of the
total number of potential residential subscribers residing in
dwellings located within such census tract, and
``(B) such services can be utilized--
``(i) at least a majority of the time during periods of
maximum demand by each such subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no deduction is allowed under
subsection (a)(1).
``(20) Subscriber.--The term `subscriber' means any person
who purchases current generation broadband services or next
generation broadband services.
``(21) Telecommunications carrier.--The term
`telecommunications carrier' has the meaning given such term
by section 3(44) of the Communications Act of 1934 (47 U.S.C.
153(44)), but--
``(A) includes all members of an affiliated group of which
a telecommunications carrier is a member, and
``(B) does not include a commercial mobile service carrier.
``(22) Total potential subscriber population.--The term
`total potential subscriber population' means, with respect
to any area and based on the most recent census data, the
total number of potential residential subscribers residing in
dwellings located in such area and potential nonresidential
subscribers maintaining permanent places of business located
in such area.
``(23) Underserved area.--The term `underserved area' means
any census tract which is located in--
``(A) an empowerment zone or enterprise community
designated under section 1391,
``(B) the District of Columbia Enterprise Zone established
under section 1400,
``(C) a renewal community designated under section 1400E,
or
``(D) a low-income community designated under section 45D.
``(24) Underserved subscriber.--The term `underserved
subscriber' means any residential subscriber residing in a
dwelling located in an underserved area or nonresidential
subscriber maintaining a permanent place of business located
in an underserved area.
``(f) Special Rules.--
``(1) Property used outside the united states, etc., not
qualified.--No expenditures shall be taken into account under
subsection (a)(1) with respect to the portion of the cost of
any property referred to in section 50(b) or with respect to
the portion of the cost of any property taken into account
under section 179.
``(2) Basis reduction.--
``(A) In general.--For purposes of this title, the basis of
any property shall be reduced by the portion of the cost of
such property taken into account under subsection (a)(1).
``(B) Ordinary income recapture.--For purposes of section
1245, the amount of the deduction allowable under subsection
(a)(1) with respect to any property which is of a character
subject to the allowance for depreciation shall be treated as
a deduction allowed for depreciation under section 167.
``(3) Coordination with section 38.--No credit shall be
allowed under section 38 with respect to any amount for which
a deduction is allowed under subsection (a)(1).''.
(b) Special Rule for Mutual or Cooperative Telephone
Companies.--Section 501(c)(12)(B) (relating to list of exempt
organizations) is amended by striking ``or'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, or'', and by adding at the end the
following:
``(v) from the sale of property subject to a lease
described in section 191(c)(2)(B), but only to the extent
such income does not in any year exceed an amount equal to
the qualified broadband expenditures which would be taken
into account under section 191 for such year if the mutual or
cooperative telephone company was not exempt from taxation
and was treated as the owner of the property subject to such
lease.''.
(c) Conforming Amendments.--
(1) Section 263(a)(1) (relating to capital expenditures) is
amended by striking ``or'' at the end of subparagraph (G), by
striking the period at the end of subparagraph (H) and
inserting ``, or'', and by adding at the end the following
new subparagraph:
``(I) expenditures for which a deduction is allowed under
section 191.''.
(2) Section 1016(a) of such Code is amended by striking
``and'' at the end of paragraph (27), by striking the period
at the end of paragraph (28) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(29) to the extent provided in section 191(f)(2).''.
(3) The table of sections for part VI of subchapter A of
chapter 1 of such Code is amended by inserting after the item
relating to section 190 the following new item:
``Sec. 191. Broadband expenditures.''.
(d) Designation of Census Tracts.--
(1) In general.--The Secretary of the Treasury shall, not
later than 90 days after the date of the enactment of this
Act, designate and publish those census tracts meeting the
criteria described in paragraphs (16), (22), and (23) of
section 191(e) of the Internal Revenue Code of 1986 (as
added by this section). In making such designations, the
Secretary of the Treasury shall consult with such other
departments and agencies as the Secretary determines
appropriate.
(2) Saturated market.--
(A) In general.--For purposes of designating and publishing
those census tracts meeting the criteria described in
subsection (e)(19) of such section 191--
(i) the Secretary of the Treasury shall prescribe not later
than 30 days after the date of the enactment of this Act the
form upon which any provider which takes the position that it
meets such criteria with respect to any census tract shall
submit a list of such census tracts (and any other
information required by the Secretary) not later than 60 days
after the date of the publication of such form, and
(ii) the Secretary of the Treasury shall publish an
aggregate list of such census tracts and the applicable
providers not later than 30 days after the last date such
submissions are allowed under clause (i).
(B) No subsequent lists required.--The Secretary of the
Treasury shall not be required to publish any list of census
tracts meeting such criteria subsequent to the list described
in subparagraph (A)(ii).
(C) Authority to disregard false submissions.--In addition
to imposing any other applicable penalties, the Secretary of
the Treasury shall have the discretion to disregard any form
described in subparagraph (A)(i) on which a provider
knowingly submitted false information.
(e) Other Regulatory Matters.--
(1) Prohibition.--No Federal or State agency or
instrumentality shall adopt regulations or ratemaking
procedures that would have the effect of confiscating any
deduction or portion thereof allowed under section 191 of the
Internal Revenue Code of 1986 (as added by this section) or
otherwise subverting the purpose of this section.
(2) Treasury regulatory authority.--It is the intent of
Congress in providing the election to deduct qualified
broadband expenditures under section 191 of the Internal
Revenue Code of 1986 (as added by this section) to provide
incentives for the purchase, installation, and connection of
equipment and facilities offering expanded broadband access
to the Internet for users in certain low income and rural
areas of the United States, as well as to residential users
nationwide, in a manner that maintains competitive neutrality
among the various classes of providers of broadband services.
Accordingly, the Secretary of the Treasury shall prescribe
such regulations as may be necessary or appropriate to carry
out the purposes of section 191 of such Code, including--
(A) regulations to determine how and when a taxpayer that
incurs qualified broadband expenditures satisfies the
requirements of section 191 of such Code to provide broadband
services, and
(B) regulations describing the information, records, and
data taxpayers are required to provide the Secretary to
substantiate compliance with the requirements of section 191
of such Code.
(f) Effective Date.--The amendments made by this section
shall apply to expenditures incurred after December 31, 2003.
______
SA 560. Mr. REID proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the appropriate place, insert the following:
SEC. ____. MECHANISM TO PROTECT SOCIAL SECURITY
(a) Certification.--
[[Page S6275]]
(1) In general.--Each year, beginning in 2003, when the
Final Monthly Treasury Statement for the most recently
completed fiscal year is issued, the Secretary of the
Treasury shall--
(A) certify whether there was a on-budget balance or
surplus in that fiscal year; and
(B) estimate whether there would be an on-budget deficit in
any of the succeeding 10 fiscal years if section 201 of this
Act takes effect January 1 of the following year.
(2) Estimate.--The calculations for the estimate under
paragraph (1)(B) shall be consistent with the baseline rules
specified in section 257 of the Balanced Budget and Emergency
Deficit Control Act of 1995, except for the assumption that
these provisions take effect and remain in effect
permanently.
(b) Delay in Dividend Tax Cut.--Notwithstanding any other
provision of law or this Act, section 201 of this Act shall
not take effect until January 1 of the year following--
(1) a certification by the Secretary of the Treasury
pursuant to paragraph (a)(1)(A) that no on-budget deficit
existed in the preceding fiscal year; and
(2) an estimate by the Secretary of the Treasury pursuant
to paragraph (a)(1)(B) that no on-budget deficits will occur
in any of the 10 succeeding fiscal years even if section 201
takes effect.
______
SA 561. Mr. DASCHLE submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF
CONTENTS.
(a) Short Title.--This Act may be cited as the ``Jobs,
Opportunity, and Prosperity Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--TAX CREDIT FOR EVERY WORKING AMERICAN
Sec. 101. Tax credit for every working American.
TITLE II--CHILD TAX CREDIT
Sec. 201. Acceleration of increase in, and refundability of, child tax
credit.
TITLE III--MARRIAGE PENALTY RELIEF
Sec. 301. Acceleration of marriage penalty relief for earned income
credit.
Sec. 302. Acceleration of increase in standard deduction for married
taxpayers filing joint returns.
TITLE IV--BUSINESS TAX CUT
Sec. 401. Small business tax credit for 50 percent of health premiums.
Sec. 402. Increased bonus depreciation.
Sec. 403. Modifications to expensing under section 179.
Sec. 404. Broadband Internet access tax credit.
TITLE V--STATE FISCAL RELIEF
Sec. 501. General revenue sharing with States and their local
governments.
Sec. 502. Temporary State FMAP relief.
TITLE VI--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
Sec. 601. Extension of the temporary extended unemployment compensation
act of 2002.
Sec. 602. Entitlement to additional weeks of temporary extended
unemployment compensation.
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
Sec. 611. Federal-state agreements.
Sec. 612. Payments to States having agreements under this title.
Sec. 613. Financing provisions.
Sec. 614. Definitions.
Sec. 615. Applicability.
Sec. 616. Coordination with the Temporary Extended Unemployment
Compensation Act of 2002.
TITLE VII--LONG-TERM FISCAL DISCIPLINE
Subtitle A--Provisions Designed To Curtail Tax Shelters
Sec. 701. Clarification of economic substance doctrine.
Sec. 702. Penalty for failing to disclose reportable transaction.
Sec. 703. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 704. Penalty for understatements attributable to transactions
lacking economic substance, etc.
Sec. 705. Modifications of substantial understatement penalty for
nonreportable transactions.
Sec. 706. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 707. Disclosure of reportable transactions.
Sec. 708. Modifications to penalty for failure to register tax
shelters.
Sec. 709. Modification of penalty for failure to maintain lists of
investors.
Sec. 710. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 711. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 712. Penalty on failure to report interests in foreign financial
accounts.
Sec. 713. Frivolous tax submissions.
Sec. 714. Regulation of individuals practicing before the Department of
Treasury.
Sec. 715. Penalty on promoters of tax shelters.
Sec. 716. Statute of limitations for taxable years for which listed
transactions not reported.
Sec. 717. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Sec. 718. Authorization of appropriations for tax law enforcement.
Subtitle B--Other Corporate Governance Provisions
Sec. 721. Affirmation of consolidated return regulation authority.
Sec. 722. Signing of corporate tax returns by chief executive officer.
Subtitle C--Provisions to Discourage Corporate Expatriation
Sec. 731. Tax treatment of inverted corporate entities.
Sec. 732. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 733. Reinsurance of United States risks in foreign jurisdictions.
Subtitle D--Imposition of Customs User Fees
Sec. 741. Customs user fees.
Subtitle E--Budget Points of Order
Sec. 751. Extension of pay-as-you-go enforcement in the Senate.
Sec. 752. Application of EGTRRA sunset to various titles.
Sec. 753. Sunset.
TITLE I--TAX CREDIT FOR EVERY WORKING AMERICAN
SEC. 101. TAX CREDIT FOR EVERY WORKING AMERICAN.
(a) In General.--The Secretary of the Treasury shall pay,
out of any money in the Treasury not otherwise appropriated,
to each eligible taxpayer an amount equal to 10 percent of
the eligible portion of the taxpayer's adjusted gross income
(as defined in section 62 of the Internal Revenue Code of
1986) for a taxable year beginning in 2002.
(b) Eligible Taxpayer.--For purposes of this section, the
term ``eligible taxpayer'' means any individual other than--
(1) any estate or trust,
(2) any nonresident alien, or
(3) any individual with respect to whom a deduction under
section 151 of such Code is allowable to another taxpayer for
a taxable year beginning in 2003.
(c) Eligible Portion.--For purposes of this section--
(1) In general.--With respect to each eligible taxpayer,
the eligible portion shall be equal to the sum of--
(A) $3,000 ($6,000 in the case of a taxpayer filing a joint
return under section 6013 of such Code), plus
(B) $3,000 for each qualifying child of the taxpayer, not
to exceed $6,000.
(2) Qualifying child.--The term ``qualifying child'' has
the meaning given such term by section 24(c) of such Code.
(d) Remittance of Payment.--The Secretary of the Treasury
shall remit the payment described in subsection (a) to the
taxpayer as soon as practicable after the date of the
enactment of this section.
TITLE II--CHILD TAX CREDIT
SEC. 201. ACCELERATION OF INCREASE IN, AND REFUNDABILITY OF,
CHILD TAX CREDIT.
(a) Acceleration of Increase in Credit.--The table
contained in section 24(a)(2) (relating to per child amount)
is amended to read as follows:
The per child amount is--e year beginning in--
2003........................................................$700 ....
2004, 2005, 2006, 2007, 2008, or 2009...................... 800 ....
2010 or thereafter......................................1,000.''.....
(b) Expansion of Credit Refundability.--Section
24(d)(1)(B)(i) (relating to portion of credit refundable) is
amended by striking ``(10 percent in the case of taxable
years beginning before January 1, 2005)''.
(c) Advance Payment of Portion of Increased Credit in
2003.--
(1) In general.--Subchapter B of chapter 65 (relating to
abatements, credits, and refunds) is amended by adding at the
end the following new section:
``SEC. 6429. ADVANCE PAYMENT OF PORTION OF INCREASED CHILD
CREDIT FOR 2003.
``(a) In General.--Each taxpayer who claimed a credit under
section 24 on the return for the taxpayer's first taxable
year beginning in 2002 shall be treated as having made a
payment against the tax imposed by chapter 1 for such taxable
year in an amount equal to the child tax credit refund amount
(if any) for such taxable year.
[[Page S6276]]
``(b) Child Tax Credit Refund Amount.--For purposes of this
section, the child tax credit refund amount is the amount by
which the aggregate credits allowed under part IV of
subchapter A of chapter 1 for such first taxable year would
have been increased if--
``(1) the per child amount under section 24(a)(2) for such
year were $700,
``(2) only qualifying children (as defined in section
24(c)) of the taxpayer for such year who had not attained age
17 as of December 31, 2003, were taken into account, and
``(3) section 24(d)(1)(B)(ii) did not apply.
``(c) Timing of Payments.--In the case of any overpayment
attributable to this section, the Secretary shall, subject to
the provisions of this title, refund or credit such
overpayment as rapidly as possible and, to the extent
practicable, before October 1, 2003. No refund or credit
shall be made or allowed under this section after December
31, 2003.
``(d) Coordination with Child Tax Credit.--
``(1) In general.--The amount of credit which would (but
for this subsection and section 26) be allowed under section
24 for the taxpayer's first taxable year beginning in 2003
shall be reduced (but not below zero) by the payments made to
the taxpayer under this section. Any failure to so reduce the
credit shall be treated as arising out of a mathematical or
clerical error and assessed according to section 6213(b)(1).
``(2) Joint returns.--In the case of a payment under this
section with respect to a joint return, half of such payment
shall be treated as having been made to each individual
filing such return.
``(e) No Interest.--No interest shall be allowed on any
overpayment attributable to this section.''.
(2) Clerical amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end
the following new item:
``Sec. 6429. Advance payment of portion of increased child credit for
2003.''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Subsection (c).--The amendments made by subsection (c)
shall take effect on the date of the enactment of this Act.
TITLE III--MARRIAGE PENALTY RELIEF
SEC. 301. ACCELERATION OF MARRIAGE PENALTY RELIEF FOR EARNED
INCOME CREDIT.
(a) In General.--Section 32(b)(2)(B) (relating to joint
returns) is amended by striking ```increased by--'' and all
that follows and inserting ``increased by $3,000.''.
(b) Inflation Adjustment.--Clause (ii) of section 32(
j)(1)(B) (relating to inflation adjustments) is amended to
read as follows:
``(ii) in the case of the $3,000 amount in subsection
(b)(2)(B), by substituting `calendar year 2003' for `calendar
year 1992' in subparagraph (B) of such section 1.''.
(c) Conforming Amendment.--Section 303(i)(2) of the
Economic Growth and Tax Relief Reconciliation Act of 2001 is
amended by striking ``2004'' and inserting ``2003''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Conforming amendment.--The amendment made by subsection
(c) shall take effect on January 1, 2003.
SEC. 302. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR
MARRIED TAXPAYERS FILING JOINT RETURNS.
(a) In General.--Paragraph (2) of section 63(c) (relating
to basic standard deduction) is amended to read as follows:
``(2) Basic standard deduction.--For purposes of paragraph
(1), the basic standard deduction is--
``(A) 200 percent of the dollar amount in effect under
subparagraph (C) for the taxable year in the case of--
``(i) a joint return, or
``(ii) a surviving spouse (as defined in section 2(a)),
``(B) $4,400 in the case of a head of household (as defined
in section 2(b)), or
``(C) $3,000 in any other case.''.
(b) Conforming Amendments.--
(1) Section 63(c)(4) is amended by striking ``(2)(D)'' each
place it occurs and inserting ``(2)(C)''.
(2) Section 63(c) is amended by striking paragraph (7).
(3) Section 301(d) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
TITLE IV--BUSINESS TAX CUT
SEC. 401. SMALL BUSINESS TAX CREDIT FOR 50 PERCENT OF HEALTH
PREMIUMS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits) is amended
by adding at the end the following:
``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the
case of a qualified small employer, the employee health
insurance expenses credit determined under this section is an
amount equal to the applicable percentage of the amount paid
by the taxpayer during the taxable year for qualified
employee health insurance expenses.
``(b) Applicable Percentage.--For purposes of subsection
(a), the applicable percentage is equal to--
``(1) 50 percent in the case of an employer with less than
26 qualified employees,
``(2) 40 percent in the case of an employer with more than
25 but less than 36 qualified employees, and
``(3) 30 percent in the case of an employer with more than
35 but less than 51 qualified employees.
``(c) Per Employee Dollar Limitation.--The amount of
qualified employee health insurance expenses taken into
account under subsection (a) with respect to any qualified
employee for any taxable year shall not exceed the maximum
employer contribution for self-only coverage or family
coverage (as applicable) determined under section 8906(a) of
title 5, United States Code, for the calendar year in which
such taxable year begins.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small employer'
means any small employer which provides eligibility for
health insurance coverage (after any waiting period (as
defined in section 9801(b)(4)) to all qualified employees of
the employer.
``(B) Small employer.--
``(i) In general.--For purposes of this paragraph, the term
`small employer' means, with respect to any calendar year,
any employer if such employer employed an average of not less
than 2 and not more than 50 qualified employees on business
days during either of the 2 preceding calendar years. For
purposes of the preceding sentence, a preceding calendar year
may be taken into account only if the employer was in
existence throughout such year.
``(ii) Employers not in existence in preceding year.--In
the case of an employer which was not in existence throughout
the 1st preceding calendar year, the determination under
clause (i) shall be based on the average number of qualified
employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee health
insurance expenses' means any amount paid by an employer for
health insurance coverage to the extent such amount is
attributable to coverage provided to any employee while such
employee is a qualified employee.
``(B) Exception for amounts paid under salary reduction
arrangements.--No amount paid or incurred for health
insurance coverage pursuant to a salary reduction arrangement
shall be taken into account under subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
paragraph (1) of section 9832(b) (determined by disregarding
the last sentence of paragraph (2) of such section).
``(3) Qualified employee.--The term `qualified employee'
means an employee of an employer who, with respect to any
period, is not provided health insurance coverage under--
``(A) a health plan of the employee's spouse,
``(B) title XVIII, XIX, or XXI of the Social Security Act,
``(C) chapter 17 of title 38, United States Code,
``(D) chapter 55 of title 10, United States Code,
``(E) chapter 89 of title 5, United States Code, or
``(F) any other provision of law.
``(4) Employee--The term `employee'--
``(A) means any individual, with respect to any calendar
year, who is reasonably expected to receive at least $5,000
of compensation from the employer during such year,
``(B) does not include an employee within the meaning of
section 401(c)(1), and
``(C) includes a leased employee within the meaning of
section 414(n).
``(5) Compensation.--The term `compensation' means amounts
described in section 6051(a)(3).
``(e) Certain Rules Made Applicable.--For purposes of this
section, rules similar to the rules of section 52 shall
apply.
``(f) Denial of Double Benefit.--No deduction or credit
under any other provision of this chapter shall be allowed
with respect to qualified employee health insurance expenses
taken into account under subsection (a).
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 2003.''.
(b) Credit To Be Part of General Business Credit.--Section
38(b) (relating to current year business credit) is amended
by striking ``plus'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following:
``(16) the employee health insurance expenses credit
determined under section 45G.''.
(c) Credit Allowed Against Minimum Tax.--
[[Page S6277]]
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Special rules for employee health insurance credit.--
``(A) In general.--In the case of the employee health
insurance credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--
``(I) the amounts in subparagraphs (A) and (B) thereof
shall be treated as being zero, and
``(II) the limitation under paragraph (1) (as modified by
subclause (I)) shall be reduced by the credit allowed under
subsection (a) for the taxable year (other than the employee
health insurance credit).
``(B) Employee health insurance credit.--For purposes of
this subsection, the term `employee health insurance credit'
means the credit allowable under subsection (a) by reason of
section 45G(a).''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by striking ``(other'' and all
that follows through ``credit)'' and inserting ``(other than
the empowerment zone employment credit or the employee health
insurance credit)''.
(d) No Carrybacks.--Subsection (d) of section 39 (relating
to carryback and carryforward of unused credits) is amended
by adding at the end the following:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the employee health
insurance expenses credit determined under section 45G may be
carried back to a taxable year ending before the date of the
enactment of section 45G.''.
(e) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
adding at the end the following:
``Sec. 45G. Employee health insurance expenses.''.
(f) Employer Outreach.--The Internal Revenue Service shall,
in conjunction with the Small Business Administration,
develop materials and implement an educational program to
ensure that business personnel are aware of--
(1) the eligibility criteria for the tax credit provided
under section 45G of the Internal Revenue Code of 1986 (as
added by this section),
(2) the methods to be used in calculating such credit,
(3) the documentation needed in order to claim such credit,
and
(4) any available health plan purchasing alliances
established under title II,
so that the maximum number of eligible businesses may claim
the tax credit.
(g) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2002.
SEC. 402. INCREASED BONUS DEPRECIATION.
(a) In General.--Subsection (k) of section 168 (relating to
accelerated cost recovery system) is amended--
(1) by adding at the end of paragraph (1) the following new
flush sentence:
``In the case of any qualified property acquired by the
taxpayer pursuant to a written binding contract which was
entered into after December 31, 2002, subparagraph (A) shall
be applied by substituting `50 percent' for `30 percent'.'',
(2) by striking ``September 11, 2004'' each place it
appears and inserting ``January 1, 2004'',
(3) by striking ``September 11, 2004'' and inserting
``January 1, 2004'', and
(4) by striking ``pre-september 11, 2004'' and inserting
``pre-january 1, 2004''.
(b) Conforming Amendments.--
(1) The heading for clause (i) of section 1400L(b)(2)(C) of
the Internal Revenue Code of 1986 is amended by striking ``30
percent additional'' and inserting ``Additional''.
(2) Section 1400L(b)(2)(D) of such Code is amended by
inserting ``(as in effect on the day after the date of the
enactment of this section)'' after ``section 168(k)(2)(D)''.
(c) Effective Date.--The amendments made by this section
shall apply to property acquired after December 31, 2002.
SEC. 403. MODIFICATIONS TO EXPENSING UNDER SECTION 179.
(a) Increase of Amount Which May Be Expensed.--
(1) In general.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000 ($75,000 in the case of any taxable
year beginning in 2003).''
(2) Increase in phaseout threshold.--Paragraph (2) of
section 179(b) is amended by striking ``$200,000'' and
inserting ``$200,000 ($325,000 in the case of any taxable
year beginning in 2003)''.
(b) Effective Date.--The amendments made by this section
shall apply to property placed in service in taxable years
beginning after December 31, 2002.
SEC. 404. BROADBAND INTERNET ACCESS TAX CREDIT.
(a) In General.--Subpart E of part IV of chapter 1
(relating to rules for computing investment credit) is
amended by inserting after section 48 the following new
section:
``SEC. 48A. BROADBAND INTERNET ACCESS CREDIT.
``(a) General Rule.--For purposes of section 46, the
broadband credit for any taxable year is the sum of--
``(1) the current generation broadband credit, plus
``(2) the next generation broadband credit.
``(b) Current Generation Broadband Credit; Next Generation
Broadband Credit.--For purposes of this section--
``(1) Current generation broadband credit.--The current
generation broadband credit for any taxable year is equal to
10 percent of the qualified expenditures incurred with
respect to qualified equipment providing current generation
broadband services to qualified subscribers and taken into
account with respect to such taxable year.
``(2) Next generation broadband credit.--The next
generation broadband credit for any taxable year is equal to
20 percent of the qualified expenditures incurred with
respect to qualified equipment providing next generation
broadband services to qualified subscribers and taken into
account with respect to such taxable year.
``(c) When Expenditures Taken Into Account.--For purposes
of this section--
``(1) In general.--Qualified expenditures with respect to
qualified equipment shall be taken into account with respect
to the first taxable year in which--
``(A) current generation broadband services are provided
through such equipment to qualified subscribers, or
``(B) next generation broadband services are provided
through such equipment to qualified subscribers.
``(2) Limitation.--
``(A) In general.--Qualified expenditures shall be taken
into account under paragraph (1) only with respect to
qualified equipment--
``(i) the original use of which commences with the
taxpayer, and
``(ii) which is placed in service,
after December 31, 2002.
``(B) Sale-leasebacks.--For purposes of subparagraph (A),
if property--
``(i) is originally placed in service after December 31,
2002, by a person, and
``(ii) sold and leased back by such person within 3 months
after the date such property was originally placed in
service,
such property shall be treated as originally placed in
service not earlier than the date on which such property is
used under the leaseback referred to in clause (ii).
``(d) Special Allocation Rules.--
``(1) Current generation broadband services.--For purposes
of determining the current generation broadband credit under
subsection (a)(1) with respect to qualified equipment through
which current generation broadband services are provided, if
the qualified equipment is capable of serving both qualified
subscribers and other subscribers, the qualified expenditures
shall be multiplied by a fraction--
``(A) the numerator of which is the sum of the number of
potential qualified subscribers within the rural areas and
the underserved areas which the equipment is capable of
serving with current generation broadband services, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with current generation broadband
services.
``(2) Next generation broadband services.--For purposes of
determining the next generation broadband credit under
subsection (a)(2) with respect to qualified equipment through
which next generation broadband services are provided, if the
qualified equipment is capable of serving both qualified
subscribers and other subscribers, the qualified expenditures
shall be multiplied by a fraction--
``(A) the numerator of which is the sum of--
``(i) the number of potential qualified subscribers within
the rural areas and underserved areas, plus
``(ii) the number of potential qualified subscribers within
the area consisting only of residential subscribers not
described in clause (i),
which the equipment is capable of serving with next
generation broadband services, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with next generation broadband services.
``(e) Definitions.--For purposes of this section--
``(1) Antenna.--The term `antenna' means any device used to
transmit or receive signals through the electromagnetic
spectrum, including satellite equipment.
``(2) Cable operator.--The term `cable operator' has the
meaning given such term by section 602(5) of the
Communications Act of 1934 (47 U.S.C. 522(5)).
``(3) Commercial mobile service carrier.--The term
`commercial mobile service carrier' means any person
authorized to provide commercial mobile radio service as
defined in section 20.3 of title 47, Code of Federal
Regulations.
``(4) Current generation broadband service.--The term
`current generation broadband service' means the transmission
of signals at a rate of at least 1,000,000 bits per second to
the subscriber and at least 128,000 bits per second from the
subscriber.
``(5) Multiplexing or demultiplexing.--The term
`multiplexing' means the transmission of 2 or more signals
over a single channel, and the term `demultiplexing'
[[Page S6278]]
means the separation of 2 or more signals previously combined
by compatible multiplexing equipment.
``(6) Next generation broadband service.--The term `next
generation broadband service' means the transmission of
signals at a rate of at least 22,000,000 bits per second to
the subscriber and at least 5,000,000 bits per second from
the subscriber.
``(7) Nonresidential subscriber.--The term `nonresidential
subscriber' means a person who purchases broadband services
which are delivered to the permanent place of business of
such person.
``(8) Open video system operator.--The term `open video
system operator' means any person authorized to provide
service under section 653 of the Communications Act of 1934
(47 U.S.C. 573).
``(9) Other wireless carrier.--The term `other wireless
carrier' means any person (other than a telecommunications
carrier, commercial mobile service carrier, cable operator,
open video system operator, or satellite carrier) providing
current generation broadband services or next generation
broadband service to subscribers through the wireless
transmission of energy through radio or light waves.
``(10) Packet switching.--The term `packet switching' means
controlling or routing the path of a digitized transmission
signal which is assembled into packets or cells.
``(11) Provider.--The term `provider' means, with respect
to any qualified equipment--
``(A) a cable operator,
``(B) a commercial mobile service carrier,
``(C) an open video system operator,
``(D) a satellite carrier,
``(E) a telecommunications carrier, or
``(F) any other wireless carrier,
providing current generation broadband services or next
generation broadband services to subscribers through such
qualified equipment.
``(12) Provision of services.--A provider shall be treated
as providing services to a subscriber if--
``(A) a subscriber has been passed by the provider's
equipment and can be connected to such equipment for a
standard connection fee,
``(B) the provider is physically able to deliver current
generation broadband services or next generation broadband
services, as applicable, to such subscribers without making
more than an insignificant investment with respect to any
such subscriber,
``(C) the provider has made reasonable efforts to make such
subscribers aware of the availability of such services,
``(D) such services have been purchased by one or more such
subscribers, and
``(E) such services are made available to such subscribers
at average prices comparable to those at which the provider
makes available similar services in any areas in which the
provider makes available such services.
``(13) Qualified equipment.--
``(A) In general.--The term `qualified equipment' means
equipment which provides current generation broadband
services or next generation broadband services--
``(i) at least a majority of the time during periods of
maximum demand to each subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no credit is allowed under subsection
(a)(1).
``(B) Only certain investment taken into account.--Except
as provided in subparagraph (C) or (D), equipment shall be
taken into account under subparagraph (A) only to the extent
it--
``(i) extends from the last point of switching to the
outside of the unit, building, dwelling, or office owned or
leased by a subscriber in the case of a telecommunications
carrier,
``(ii) extends from the customer side of the mobile
telephone switching office to a transmission/receive antenna
(including such antenna) owned or leased by a subscriber in
the case of a commercial mobile service carrier,
``(iii) extends from the customer side of the headend to
the outside of the unit, building, dwelling, or office owned
or leased by a subscriber in the case of a cable operator or
open video system operator, or
``(iv) extends from a transmission/receive antenna
(including such antenna) which transmits and receives signals
to or from multiple subscribers, to a transmission/receive
antenna (including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a satellite carrier or other wireless carrier,
unless such other wireless carrier is also a
telecommunications carrier.
``(C) Packet switching equipment.--Packet switching
equipment, regardless of location, shall be taken into
account under subparagraph (A) only if it is deployed in
connection with equipment described in subparagraph (B) and
is uniquely designed to perform the function of packet
switching for current generation broadband services or next
generation broadband services, but only if such packet
switching is the last in a series of such functions performed
in the transmission of a signal to a subscriber or the first
in a series of such functions performed in the transmission
of a signal from a subscriber.
``(D) Multiplexing and demultiplexing equipment.--
Multiplexing and demultiplexing equipment shall be taken into
account under subparagraph (A) only to the extent it is
deployed in connection with equipment described in
subparagraph (B) and is uniquely designed to perform the
function of multiplexing and demultiplexing packets or cells
of data and making associated application adaptions, but only
if such multiplexing or demultiplexing equipment is located
between packet switching equipment described in subparagraph
(C) and the subscriber's premises.
``(14) Qualified expenditure.--
``(A) In general.--The term `qualified expenditure' means
any amount--
``(i) chargeable to capital account with respect to the
purchase and installation of qualified equipment (including
any upgrades thereto) for which depreciation is allowable
under section 168, and
``(ii) incurred after December 31, 2002, and before January
1, 2004.
``(B) Certain satellite expenditures excluded.--Such term
shall not include any expenditure with respect to the
launching of any satellite equipment.
``(15) Qualified subscriber.--The term `qualified
subscriber' means--
``(A) with respect to the provision of current generation
broadband services--
``(i) a nonresidential subscriber maintaining a permanent
place of business in a rural area or underserved area, or
``(ii) a residential subscriber residing in a dwelling
located in a rural area or underserved area which is not a
saturated market, and
``(B) with respect to the provision of next generation
broadband services--
``(i) a nonresidential subscriber maintaining a permanent
place of business in a rural area or underserved area, or
``(ii) a residential subscriber.
``(16) Residential subscriber.--The term `residential
subscriber' means an individual who purchases broadband
services which are delivered to such individual's dwelling.
``(17) Rural area.--The term `rural area' means any census
tract which--
``(A) is not within 10 miles of any incorporated or census
designated place containing more than 25,000 people, and
``(B) is not within a county or county equivalent which has
an overall population density of more than 500 people per
square mile of land.
``(18) Rural subscriber.--The term `rural subscriber' means
a residential subscriber residing in a dwelling located in a
rural area or nonresidential subscriber maintaining a
permanent place of business located in a rural area.
``(19) Satellite carrier.--The term `satellite carrier'
means any person using the facilities of a satellite or
satellite service licensed by the Federal Communications
Commission and operating in the Fixed-Satellite Service under
part 25 of title 47 of the Code of Federal Regulations or the
Direct Broadcast Satellite Service under part 100 of title 47
of such Code to establish and operate a channel of
communications for distribution of signals, and owning or
leasing a capacity or service on a satellite in order to
provide such distribution.
``(20) Saturated market.--The term `saturated market' means
any census tract in which, as of the date of the enactment of
this section--
``(A) current generation broadband services have been
provided by one or more providers to 85 percent or more of
the total number of potential residential subscribers
residing in dwellings located within such census tract, and
``(B) such services can be utilized--
``(i) at least a majority of the time during periods of
maximum demand by each such subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no credit is allowed under subsection
(a)(1).
``(21) Subscriber.--The term `subscriber' means a person
who purchases current generation broadband services or next
generation broadband services.
``(22) Telecommunications carrier.--The term
`telecommunications carrier' has the meaning given such term
by section 3(44) of the Communications Act of 1934 (47 U.S.C.
153(44)), but--
``(A) includes all members of an affiliated group of which
a telecommunications carrier is a member, and
``(B) does not include a commercial mobile service carrier.
``(23) Total potential subscriber population.--The term
`total potential subscriber population' means, with respect
to any area and based on the most recent census data, the
total number of potential residential subscribers residing in
dwellings located in such area and potential nonresidential
subscribers maintaining permanent places of business located
in such area.
``(24) Underserved area.--The term `underserved area' means
any census tract which is located in--
``(A) an empowerment zone or enterprise community
designated under section 1391,
``(B) the District of Columbia Enterprise Zone established
under section 1400,
``(C) a renewal community designated under section 1400E,
or
``(D) a low-income community designated under section 45D.
``(25) Underserved subscriber.--The term `underserved
subscriber' means a residential subscriber residing in a
dwelling located in
[[Page S6279]]
an underserved area or nonresidential subscriber maintaining
a permanent place of business located in an underserved
area.''.
(b) Credit To Be Part of Investment Credit.--Section 46
(relating to the amount of investment credit) is amended by
striking ``and'' at the end of paragraph (2), by striking the
period at the end of paragraph (3) and inserting ``, and'',
and by adding at the end the following:
``(4) the broadband Internet access credit.''
(c) Special Rule for Mutual or Cooperative Telephone
Companies.--Section 501(c)(12)(B) (relating to list of exempt
organizations) is amended by striking ``or'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, or'', and by adding at the end the
following new clause:
``(v) from the sale of property subject to a lease
described in section 48A(c)(2)(B), but only to the extent
such income does not in any year exceed an amount equal to
the credit for qualified expenditures which would be
determined under section 48A for such year if the mutual or
cooperative telephone company was not exempt from taxation
and was treated as the owner of the property subject to such
lease.''.
(d) Conforming Amendment.--The table of sections for
subpart E of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 48 the
following:
``Sec. 48A. Broadband internet access credit.''.
(e) Designation of Census Tracts.--
(1) In general.--The Secretary of the Treasury shall, not
later than 90 days after the date of the enactment of this
Act, designate and publish those census tracts meeting the
criteria described in paragraphs (17) and (24) of section
48A(e) of the Internal Revenue Code of 1986 (as added by this
section). In making such designations, the Secretary of the
Treasury shall consult with such other departments and
agencies as the Secretary determines appropriate.
(2) Saturated market.--
(A) In general.--For purposes of designating and publishing
those census tracts meeting the criteria described in
subsection (e)(20) of such section 48A--
(i) the Secretary of the Treasury shall prescribe not later
than 30 days after the date of the enactment of this Act the
form upon which any provider which takes the position that it
meets such criteria with respect to any census tract shall
submit a list of such census tracts (and any other
information required by the Secretary) not later than 60 days
after the date of the publication of such form, and
(ii) the Secretary of the Treasury shall publish an
aggregate list of such census tracts submitted and the
applicable providers not later than 30 days after the last
date such submissions are allowed under clause (i).
(B) No subsequent lists required.--The Secretary of the
Treasury shall not be required to publish any list of census
tracts meeting such criteria subsequent to the list described
in subparagraph (A)(ii).
(C) Penalties for submission of false information.--The
Secretary of the Treasury shall designate appropriate
penalties for knowingly submitting false information on the
form described in subparagraph (A)(i).
(f) Other Regulatory Matters.--
(1) Prohibition.--No Federal or State agency or
instrumentality shall adopt regulations or ratemaking
procedures that would have the effect of confiscating any
credit or portion thereof allowed under section 48A of the
Internal Revenue Code of 1986 (as added by this section) or
otherwise subverting the purpose of this section.
(2) Treasury regulatory authority.--It is the intent of
Congress in providing the broadband Internet access credit
under section 48A of the Internal Revenue Code of 1986 (as
added by this section) to provide incentives for the
purchase, installation, and connection of equipment and
facilities offering expanded broadband access to the Internet
for users in certain low income and rural areas of the United
States, as well as to residential users nationwide, in a
manner that maintains competitive neutrality among the
various classes of providers of broadband services.
Accordingly, the Secretary of the Treasury shall prescribe
such regulations as may be necessary or appropriate to carry
out the purposes of section 48A of such Code, including--
(A) regulations to determine how and when a taxpayer that
incurs qualified expenditures satisfies the requirements of
section 48A of such Code to provide broadband services, and
(B) regulations describing the information, records, and
data taxpayers are required to provide the Secretary to
substantiate compliance with the requirements of section 48A
of such Code.
(g) Effective Date.--The amendments made by this section
shall apply to expenditures incurred after December 31, 2002,
and before January 1, 2004.
TITLE V--STATE FISCAL RELIEF
SEC. 501. GENERAL REVENUE SHARING WITH STATES AND THEIR LOCAL
GOVERNMENTS.
(a) Appropriation.--There is authorized to be appropriated
and is appropriated to carry out this section $20,000,000,000
for fiscal year 2003.
(b) Allotments.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, allot to each of the States as
follows, except that no State shall receive less than \1/2\
of 1 percent of such amount:
(1) State level.--$16,000,000,000 shall be allotted among
such States on the basis of the relative population of each
such State, as determined by the Secretary on the basis of
the most recent satisfactory data.
(2) Local government level.--$4,000,000,000 shall be
allotted among such States as determined under paragraph (1)
for distribution to the various units of general local
government within such States on the basis of the relative
population of each such unit within each such State, as
determined by the Secretary on the basis of the most recent
satisfactory data.
(c) Definitions.--For purposes of this section--
(1) State.--The term ``State'' means any of the several
States, the District of Columbia, and the Commonwealth of
Puerto Rico.
(2) Unit of general local government.--
(A) In general.--The term ``unit of general local
government'' means--
(i) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(ii) the District of Columbia, the Commonwealth of Puerto
Rico, and the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(B) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
section, the rules under section 6720(c) of title 31, United
States Code, shall apply.
SEC. 502. TEMPORARY STATE FMAP RELIEF.
(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
subsection for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
Each Calendar Quarter of Fiscal Year 2004.--Notwithstanding
any other provision of law, but subject to subsection (e), if
the FMAP determined without regard to this subsection for a
State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP
for each calendar quarter of fiscal year 2004, before the
application of this section.
(c) General 4.95 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and Each Calendar
Quarter of Fiscal Year 2004.--Notwithstanding any other
provision of law, but subject to subsections (e) and (f), for
each State for the third and fourth calendar quarters of
fiscal year 2003 and each calendar quarter of fiscal year
2004, the FMAP (taking into account the application of
subsections (a) and (b)) shall be increased by 4.95
percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and each calendar quarter of
fiscal year 2004, the amounts otherwise determined for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa under subsections (f) and (g) of section
1108 of the Social Security Act (42 U.S.C. 1308) shall each
be increased by an amount equal to 9.90 percent of such
amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4);
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.); or
(3) the percentage described in the third sentence of
section 1905(b) of the Social Security Act (42 U.S.C.
1396d(b)) (relating to amounts expended as medical assistance
for services received through an Indian Health Service
facility whether operated by the Indian Health Service or by
an Indian tribe or tribal organization (as defined in section
4 of the Indian Health Care Improvement Act)).
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on July 1, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after July 1, 2003, but prior to the date of enactment
of this Act is eligible for an increase in its FMAP under
subsection (c) or an increase in a cap
[[Page S6280]]
amount under subsection (d) in the first calendar quarter
(and any subsequent calendar quarters) in which the State has
reinstated eligibility that is no more restrictive than the
eligibility under such plan (or waiver) as in effect on July
1, 2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of October 1, 2004, this section
is repealed.
TITLE VI--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
SEC. 601. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT
COMPENSATION ACT OF 2002.
(a) In General.--Section 208 of the Temporary Extended
Unemployment Compensation Act of 2002 (Public Law 107-147;
116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3),
is amended--
(1) in subsection (a)(2), by striking ``before June 1'' and
inserting ``on or before November 30'';
(2) in subsection (b)(1), by striking ``May 31, 2003'' and
inserting ``November 30, 2003'';
(3) in subsection (b)(2)--
(A) in the heading, by striking ``may 31, 2003'' and
inserting ``november 30, 2003''; and
(B) by striking ``May 31, 2003'' and inserting ``November
30, 2003''; and
(4) in subsection (b)(3), by striking ``August 30, 2003''
and inserting ``February 28, 2004''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 21).
SEC. 602. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY
EXTENDED UNEMPLOYMENT COMPENSATION.
(a) Entitlement to Additional Weeks.--
(1) In general.--Paragraph (1) of section 203(b) of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 28) is amended--
(A) in subparagraph (A), by striking ``50 percent'' and
inserting ``100 percent''; and
(B) in subparagraph (B), by striking ``13 times'' and
inserting ``26 times''.
(2) Repeal of restriction on augmentation during
transitional period.--Section 208(b) of the Temporary
Extended Unemployment Compensation Act of 2002 (Public Law
107-147), as amended by Public Law 108-1 (117 Stat. 3) and
section 601(a), is amended--
(A) in paragraph (1)--
(i) by striking ``paragraphs (2) and (3)'' and inserting
``paragraph (2)''; and
(ii) by inserting before the period at the end the
following: ``, including such compensation payable by reason
of amounts deposited in such account after such date pursuant
to the application of subsection (c) of such section'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2).
(3) Extension of transition limitation.--Section 208(b)(2)
of the Temporary Extended Unemployment Compensation Act of
2002 (Public Law 107-147), as amended by Public Law 108-1
(117 Stat. 3) and section 601(a)(4) and as redesignated by
paragraph (2), is amended by striking ``February 28, 2004''
and inserting ``May 29, 2004''.
(4) Conforming amendment for augmented benefits.--Section
203(c)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by
striking ``the amount originally established in such account
(as determined under subsection (b)(1))'' and inserting ``7
times the individual's average weekly benefit amount for the
benefit year''.
(b) Effective Date and Application.--
(1) In general.--The amendments made by subsection (a)
shall apply with respect to weeks of unemployment beginning
on or after the date of enactment this Act.
(2) TEUC-X amounts deposited in account prior to date of
enactment deemed to be the additional teuc amounts provided
by this section.--In applying the amendments made by
subsection (a) under the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26),
the Secretary of Labor shall deem any amounts deposited into
an individual's temporary extended unemployment compensation
account by reason of section 203(c) of such Act (commonly
known as ``TEUC-X amounts'') prior to the date of enactment
of this Act to be amounts deposited in such account by reason
of section 203(b) of such Act, as amended by subsection (a)
(commonly known as ``TEUC amounts'').
(3) Application to exhaustees and current beneficiaries.--
(A) Exhaustees.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) who exhausted such individual's rights to such
compensation (by reason of the payment of all amounts in such
individual's temporary extended unemployment compensation
account) before such date,
such individual's eligibility for any additional weeks of
temporary extended unemployment compensation by reason of the
amendments made by subsection (a) shall apply with respect to
weeks of unemployment beginning on or after the date of
enactment of this Act.
(B) Current beneficiaries.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) as to whom the condition described in subparagraph
(A)(ii) does not apply,
such individual shall be eligible for temporary extended
unemployment compensation (in accordance with the provisions
of the Temporary Extended Unemployment Compensation Act of
2002, as amended by subsection (a)) with respect to weeks of
unemployment beginning on or after the date of enactment of
this Act.
(4) Redetermination of eligibility for augmented amounts
for individuals for whom such a determination was made prior
to the date of enactment.--Any determination of whether the
individual's State is in an extended benefit period under
section 203(c) of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28)
made prior to the date of enactment of this Act shall be
disregarded and the determination under such section shall be
made as follows:
(A) Individuals who exhausted all teuc and teuc-x amounts
prior to the date of enactment.--In the case of an individual
whose temporary extended unemployment account has, prior to
the date of enactment of this Act, been both augmented under
such section 203(c) and exhausted of all amounts by which it
was so augmented, the determination shall be made as of such
date of enactment.
(B) All other individuals.--In the case of an individual
who is not described in subparagraph (A), the determination
shall be made at the time that the individual's account
established under such section 203, as amended by subsection
(a), is exhausted.
(5) No effect on provisions related to displaced airline
related workers.--The amendments made by this section and
section 601 shall have no effect on the provisions of section
4002 of the Emergency Wartime Supplemental Appropriations
Act, 2003 (Public Law 108-11).
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
SEC. 611. FEDERAL-STATE AGREEMENTS.
(a) In General.--Any State which desires to do so may enter
into and participate in an agreement under this title with
the Secretary of Labor (in this title referred to as the
``Secretary''). Any State which is a party to an agreement
under this title may, upon providing 30 days' written notice
to the Secretary, terminate such agreement.
(b) Provisions of Agreement.--
(1) In general.--Subject to paragraph (3), any agreement
under subsection (a) shall provide that the State agency of
the State, in addition to any amounts of regular compensation
to which an individual may be entitled under the State law,
shall make payments of temporary enhanced regular
unemployment compensation to an individual in an amount and
to the extent that the individual would be entitled to
regular compensation if the State law were applied with the
modifications described in paragraph (2).
(2) Modifications described.--The modifications described
in this paragraph are as follows:
(A) In the case of an individual who is not eligible for
regular compensation under the State law because of the use
of a definition of base period that does not count wages
earned in the most recently completed calendar quarter, then
eligibility for compensation shall be determined by applying
a base period ending at the close of the most recently
completed calendar quarter.
(B) In the case of an individual who is not eligible for
regular compensation under the State law because such
individual does not meet requirements relating to
availability for work, active search for work, or refusal to
accept work, because such individual is seeking, or is
available for, less than full-time work, then compensation
shall not be denied by such State to an otherwise eligible
individual who seeks less than full-time work or fails to
accept full-time work.
(3) Reduction of amounts of regular compensation available
for individuals who sought part-time work or failed to accept
full-time work.--Any agreement under subsection (a) shall
provide that the State agency of the State shall reduce the
amount of regular compensation available to an individual who
has received temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in paragraph (2)(B) by the amount of
such temporary enhanced regular unemployment compensation.
(c) Coordination Rule.--The modifications described in
subsection (b)(2) shall also apply in determining the amount
of benefits payable under any Federal law to the extent that
those benefits are determined by reference to regular
compensation payable under the State law of the State
involved.
[[Page S6281]]
SEC. 612. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS
TITLE.
(a) General Rule.--There shall be paid to each State which
has entered into an agreement under this title an amount
equal to--
(1) 100 percent of any temporary enhanced regular
unemployment compensation; and
(2) 100 percent of any regular compensation which is paid
to individuals by such State by reason of the fact that its
State law contains provisions comparable to the modifications
described in subparagraphs (A) and (B) of section 611(b)(2),
but only to the extent that those amounts would, if such
amounts were instead payable by virtue of the State law's
being deemed to be so modified pursuant to section 611(b)(1),
have been reimbursable under paragraph (1).
(b) Determination of Amount.--Sums under subsection (a)
payable to any State by reason of such State having an
agreement under this title shall be payable, either in
advance or by way of reimbursement (as may be determined by
the Secretary), in such amounts as the Secretary estimates
the State will be entitled to receive under this title for
each calendar month, reduced or increased, as the case may
be, by any amount by which the Secretary finds that the
Secretary's estimates for any prior calendar month were
greater or less than the amounts which should have been paid
to the State. Such estimates may be made on the basis of such
statistical, sampling, or other method as may be agreed upon
by the Secretary and the State agency of the State involved.
SEC. 613. FINANCING PROVISIONS.
(a) In General.--Funds in the extended unemployment
compensation account (as established by section 905(a) of the
Social Security Act (42 U.S.C. 1105(a))), and the Federal
unemployment account (as established by section 904(g) of
such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund
(as established by section 904(a) of such Act (42 U.S.C.
1104(a))) shall be used for the making of payments to States
having agreements entered into under this title.
(b) Certification.--The Secretary shall from time to time
certify to the Secretary of the Treasury for payment to each
State the sums which are payable to such State under this
title. The Secretary of the Treasury, prior to audit or
settlement by the General Accounting Office, shall make
payments to the State in accordance with such certification
by transfers from the extended unemployment compensation
account (as so established), or, to the extent that there are
insufficient funds in that account, from the Federal
unemployment account, to the account of such State in the
Unemployment Trust Fund (as so established).
(c) Assistance to States.--There are appropriated out of
the employment security administration account of the
Unemployment Trust Fund (as established by section 901(a) of
the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to
reimburse States for the costs of the administration of
agreements under this title (including any improvements in
technology in connection therewith) and to provide
reemployment services to unemployment compensation claimants
in States having agreements under this title. Each State's
share of the amount appropriated by the preceding sentence
shall be determined by the Secretary according to the factors
described in section 302(a) of the Social Security Act (42
U.S.C. 502(a)) and certified by the Secretary to the
Secretary of the Treasury.
(d) Appropriations for Certain Payments.--There are
appropriated from the general fund of the Treasury, without
fiscal year limitation, to the extended unemployment
compensation account (as so established) of the Unemployment
Trust Fund (as so established) such sums as the Secretary
estimates to be necessary to make the payments under this
section in respect of--
(1) compensation payable under chapter 85 of title 5,
United States Code; and
(2) compensation payable on the basis of services to which
section 3309(a)(1) of the Internal Revenue Code of 1986
applies.
Amounts appropriated pursuant to the preceding sentence shall
not be required to be repaid.
SEC. 614. DEFINITIONS.
For purposes of this title, the terms ``compensation'',
``base period'', ``regular compensation'', ``State'', ``State
agency'', ``State law'', and ``week'' have the respective
meanings given such terms under section 205 of the Federal-
State Extended Unemployment Compensation Act of 1970.
SEC. 615. APPLICABILITY.
(a) In General.--Except as provided in subsection (b), an
agreement entered into under this title shall apply to weeks
of unemployment--
(1) beginning after the date on which such agreement is
entered into; and
(2) ending before July 1, 2004.
(b) Phase-Out of TERUC.--
(1) In general.--Subject to paragraph (2), in the case of
an individual who has established eligibility for temporary
enhanced regular unemployment compensation, but who has not
exhausted all rights to such compensation, as of the last day
of the week ending before July 1, 2004, such compensation
shall continue to be payable to such individual for any week
beginning after such date for which the individual meets the
eligibility requirements of this title.
(2) Limitation.--No compensation shall be payable by reason
of paragraph (1) for any week beginning after December 31,
2004.
SEC. 616. COORDINATION WITH THE TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION ACT OF 2002.
(a) In General.--The Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended--
(1) in section 202(b)(1), by inserting ``, and who have
exhausted all rights to temporary enhanced regular
unemployment compensation'' before the semicolon at the end;
(2) in section 202(b)(2), by inserting ``, temporary
enhanced regular unemployment compensation,'' after ``regular
compensation'';
(3) in section 202(c), by inserting ``(or, as the case may
be, such individual's rights to temporary enhanced regular
unemployment compensation)'' after ``State law'' in the
matter preceding paragraph (1);
(4) in section 202(c)(1), by inserting ``and no payments of
temporary enhanced regular unemployment compensation can be
made'' after ``under such law'';
(5) in section 202(d)(1), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
(including dependents' allowances) payable to such individual
for such a week,'' after ``total unemployment'';
(6) in section 202(d)(2)(A), by inserting ``, or, as the
case may be, to temporary enhanced regular unemployment
compensation,'' after ``State law'';
(7) in section 203(b)(1)(A), by inserting ``plus the amount
of any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``under
such law''; and
(8) in section 203(b)(2), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``total
unemployment''.
(b) Amount of TEUC Offset by Amount of TERUC.--Section
203(b)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting a comma; and
(2) by adding at the end the following:
``minus the number of weeks in which the individual was
entitled to temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in section 611(b)(2)(A) of the Jobs,
Opportunity, and Prosperity Act of 2003 (relating to the
alternative base period) multiplied by the individual's
average weekly benefit amount for the benefit year.''.
(c) Temporary Enhanced Regular Unemployment Compensation
Defined.--Section 207 of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended to read as follows:
``SEC. 207. DEFINITIONS.
``In this title:
``(1) General definitions.--The terms `compensation',
`regular compensation', `extended compensation', `additional
compensation', `benefit year', `base period', `State', `State
agency', `State law', and `week' have the respective meanings
given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note).
``(2) Temporary enhanced regular unemployment
compensation.--The term `temporary enhanced regular
unemployment compensation' means temporary enhanced regular
unemployment benefits payable under title II of the Jobs,
Opportunity, and Prosperity Act of 2003.''.
TITLE V--LONG-TERM FISCAL DISCIPLINE
Subtitle A--Provisions Designed To Curtail Tax Shelters
SEC. 701. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects) the taxpayer's economic position,
and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
In applying subclause (II), a purpose of achieving a
financial accounting benefit shall not be taken into account
in determining whether a transaction has a substantial nontax
purpose if the origin of such financial accounting benefit is
a reduction of income tax.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
[[Page S6282]]
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(D) Treatment of lessors.--A lessor of tangible property
subject to a lease shall be treated as satisfying the
requirements of paragraph (1)(B)(ii) with respect to the
leased property if such lease satisfies such requirements as
provided by the Secretary.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into after the date of
the enactment of this Act.
SEC. 702. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 703. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
[[Page S6283]]
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements and noneconomic substance transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
[[Page S6284]]
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 704. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(n)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(n)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''.
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into after the date of
the enactment of this Act.
SEC. 705. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY
FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''.
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 706. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 707. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''.
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.
[[Page S6285]]
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 708. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the date the
return including the transaction is filed under section 6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 709. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 710. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority To Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct' means any action, or failure to take
action, subject to penalty under section 6700, 6701, 6707, or
6708.''.
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS.''.
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 711. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 712. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''.
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 713. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who
[[Page S6286]]
submits a specified frivolous submission shall pay a penalty
of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''.
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''.
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''.
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-in-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, Etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''.
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 714. REGULATION OF INDIVIDUALS PRACTICING BEFORE THE
DEPARTMENT OF TREASURY.
(a) Censure; Imposition of Penalty.--
(1) In general.--Section 330(b) of title 31, United States
Code, is amended--
(A) by inserting ``, or censure,'' after ``Department'',
and
(B) by adding at the end the following new flush sentence:
``The Secretary may impose a monetary penalty on any
representative described in the preceding sentence. If the
representative was acting on behalf of an employer or any
firm or other entity in connection with the conduct giving
rise to such penalty, the Secretary may impose a monetary
penalty on such employer, firm, or entity if it knew, or
reasonably should have known, of such conduct. Such penalty
shall not exceed the gross income derived (or to be derived)
from the conduct giving rise to the penalty and may be in
addition to, or in lieu of, any suspension, disbarment, or
censure.''.
(2) Effective date.--The amendments made by this subsection
shall apply to actions taken after the date of the enactment
of this Act.
(b) Tax Shelter Opinions, Etc.--Section 330 of such title
31 is amended by adding at the end the following new
subsection:
``(d) Nothing in this section or in any other provision of
law shall be construed to limit the authority of the
Secretary of the Treasury to impose standards applicable to
the rendering of written advice with respect to any entity,
transaction plan or arrangement, or other plan or
arrangement, which is of a type which the Secretary
determines as having a potential for tax avoidance or
evasion.''.
SEC. 715. PENALTY ON PROMOTERS OF TAX SHELTERS.
(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''.
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 716. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(e)(1) (relating to
substantial omission of items for income taxes) is amended by
adding at the end the following new subparagraph:
``(C) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the tax for
such taxable year may be assessed, or a proceeding in court
for collection of such tax may be begun without assessment,
at any time within 6 years after the time the return is
filed. This subparagraph shall not apply to any taxable year
if the time for assessment or beginning the proceeding in
court has expired before the time a transaction is treated as
a listed transaction under section 6011.''.
(b) Effective Date.--The amendment made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 717. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable To Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 718. AUTHORIZATION OF APPROPRIATIONS FOR TAX LAW
ENFORCEMENT.
There is authorized to be appropriated $300,000,000 for
each fiscal year beginning after September 30, 2002, for the
purpose of carrying out tax law enforcement to combat tax
avoidance transactions and other tax shelters, including the
use of offshore financial accounts to conceal taxable income.
Subtitle B--Other Corporate Governance Provisions
SEC. 721. AFFIRMATION OF CONSOLIDATED RETURN REGULATION
AUTHORITY.
(a) In General.--Section 1502 (relating to consolidated
return regulations) is amended by adding at the end the
following new sentence: ``In prescribing such regulations,
the Secretary may prescribe rules applicable to corporations
filing consolidated returns under section 1501 that are
different from other provisions of this title that would
apply if such corporations filed separate returns.''.
(b) Result Not Overturned.--Notwithstanding subsection (a),
the Internal Revenue Code of 1986 shall be construed by
treating Treasury regulation Sec. 1.1502-20(c)(1)(iii)
[[Page S6287]]
(as in effect on January 1, 2001) as being inapplicable to
the type of factual situation in 255 F.3d 1357 (Fed. Cir.
2001).
(c) Effective Date.--The provisions of this section shall
apply to taxable years beginning before, on, or after the
date of the enactment of this Act.
SEC. 722. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE
OFFICER.
(a) In General.--Section 6062 (relating to signing of
corporation returns) is amended by striking the first
sentence and inserting the following new sentence: ``The
return of a corporation with respect to income shall be
signed by the chief executive officer of such corporation (or
other such officer of the corporation as the Secretary may
designate if the corporation does not have a chief executive
officer). The preceding sentence shall not apply to any
return of a regulated investment company (within the meaning
of section 851).''..
(b) Effective Date.--The amendment made by this section
shall apply to returns filed after the date of the enactment
of this Act.
Subtitle C--Provisions to Discourage Corporate Expatriation
SEC. 731. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.
(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.
``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.
Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base In Certain
Inversion Transactions To Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',
then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).
For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any income or gain required to be
recognized under section 304, 311(b), 367, 1001, or 1248, or
under any other provision of chapter 1, by reason of the
transfer during the applicable period of stock or other
properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.
The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and such deficiency may
be assessed before the expiration of such 3-year period
notwithstanding the provisions of any other law or rule of
law which would otherwise prevent such assessment.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not
[[Page S6288]]
filed in good faith or does not substantially comply with
such requirements.
If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.
``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--
``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is under such common control with any member
of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.
``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved in
transactions to which section 7874 of such Code (as added by
subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:
``Sec. 7874. Rules relating to inverted corporate entities.''.
(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.
SEC. 732. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.
(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:
``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS
``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.
[[Page S6289]]
``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.
``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only If Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.
``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).
Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or to any specified stock
compensation (as defined in section 5000A) on which tax is
imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:
``Chapter 48. Stock compensation of insiders in inverted
corporations.''.
(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and (e)(1) of section 5000A of
the Internal Revenue Code of 1986, as added by this section.
SEC. 733. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.
(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.
Subtitle D--Imposition of Customs User Fees
SEC. 741. CUSTOMS USER FEES.
Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended
by striking ``September 30, 2003'' and inserting ``September
30, 2013''.
Subtitle E--Budget Points of Order
SEC. 751. EXTENSION OF PAY-AS-YOU-GO ENFORCEMENT IN THE
SENATE.
Section 2 of Senate Resolution 304 (107th Congress) is
amended--
(1) in subsection (a)(1), by striking ``April 15, 2003''
and inserting ``the end of the 108th Congress''; and
(2) in subsection (b)(1)(B), by striking ``April 15, 2003''
and inserting ``at the end of the 108th Congress''.
SEC. 752. APPLICATION OF EGTRRA SUNSET TO VARIOUS TITLES.
Each amendment made by titles II and III shall be subject
to title IX of the Economic Growth and Tax Relief
Reconciliation Act of 2001 to the same extent and in the same
manner as the provision of such Act to which such amendment
relates.
SEC. 753. SUNSET.
(a) In General.--Except as otherwise provided, the
provisions of, and amendments made, by this Act shall not
apply to taxable years beginning after December 31, 2012, and
the Internal Revenue Code of 1986 shall be applied and
administered to such years as if such amendments had never
been enacted.
(b) Exceptions.--Subsection (a) shall not apply to this
title and titles II and III.
______
SA 562. Mr. DASCHLE submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. SMALL BUSINESS TAX CREDIT FOR 50 PERCENT OF HEALTH
PREMIUMS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits) is amended
by adding at the end the following:
``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the
case of a qualified small employer, the employee health
insurance expenses credit determined under this section
[[Page S6290]]
is an amount equal to the applicable percentage of the amount
paid by the taxpayer during the taxable year for qualified
employee health insurance expenses.
``(b) Applicable Percentage.--For purposes of subsection
(a), the applicable percentage is equal to--
``(1) 50 percent in the case of an employer with less than
26 qualified employees,
``(2) 40 percent in the case of an employer with more than
25 but less than 36 qualified employees, and
``(3) 30 percent in the case of an employer with more than
35 but less than 51 qualified employees.
``(c) Per Employee Dollar Limitation.--The amount of
qualified employee health insurance expenses taken into
account under subsection (a) with respect to any qualified
employee for any taxable year shall not exceed the maximum
employer contribution for self-only coverage or family
coverage (as applicable) determined under section 8906(a) of
title 5, United States Code, for the calendar year in which
such taxable year begins.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small employer'
means any small employer which provides eligibility for
health insurance coverage (after any waiting period (as
defined in section 9801(b)(4)) to all qualified employees of
the employer.
``(B) Small employer.--
``(i) In general.--For purposes of this paragraph, the term
`small employer' means, with respect to any calendar year,
any employer if such employer employed an average of not less
than 2 and not more than 50 qualified employees on business
days during either of the 2 preceding calendar years. For
purposes of the preceding sentence, a preceding calendar year
may be taken into account only if the employer was in
existence throughout such year.
``(ii) Employers not in existence in preceding year.--In
the case of an employer which was not in existence throughout
the 1st preceding calendar year, the determination under
clause (i) shall be based on the average number of qualified
employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee health
insurance expenses' means any amount paid by an employer for
health insurance coverage to the extent such amount is
attributable to coverage provided to any employee while such
employee is a qualified employee.
``(B) Exception for amounts paid under salary reduction
arrangements.--No amount paid or incurred for health
insurance coverage pursuant to a salary reduction arrangement
shall be taken into account under subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
paragraph (1) of section 9832(b) (determined by disregarding
the last sentence of paragraph (2) of such section).
``(3) Qualified employee.--The term `qualified employee'
means an employee of an employer who, with respect to any
period, is not provided health insurance coverage under--
``(A) a health plan of the employee's spouse,
``(B) title XVIII, XIX, or XXI of the Social Security Act,
``(C) chapter 17 of title 38, United States Code,
``(D) chapter 55 of title 10, United States Code,
``(E) chapter 89 of title 5, United States Code, or
``(F) any other provision of law.
``(4) Employee--The term `employee'--
``(A) means any individual, with respect to any calendar
year, who is reasonably expected to receive at least $5,000
of compensation from the employer during such year,
``(B) does not include an employee within the meaning of
section 401(c)(1), and
``(C) includes a leased employee within the meaning of
section 414(n).
``(5) Compensation.--The term `compensation' means amounts
described in section 6051(a)(3).
``(e) Certain Rules Made Applicable.--For purposes of this
section, rules similar to the rules of section 52 shall
apply.
``(f) Denial of Double Benefit.--No deduction or credit
under any other provision of this chapter shall be allowed
with respect to qualified employee health insurance expenses
taken into account under subsection (a).
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 2003.''.
(b) Credit To Be Part of General Business Credit.--Section
38(b) (relating to current year business credit) is amended
by striking ``plus'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following:
``(16) the employee health insurance expenses credit
determined under section 45G.''.
(c) Credit Allowed Against Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Special rules for employee health insurance credit.--
``(A) In general.--In the case of the employee health
insurance credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--
``(I) the amounts in subparagraphs (A) and (B) thereof
shall be treated as being zero, and
``(II) the limitation under paragraph (1) (as modified by
subclause (I)) shall be reduced by the credit allowed under
subsection (a) for the taxable year (other than the employee
health insurance credit).
``(B) Employee health insurance credit.--For purposes of
this subsection, the term `employee health insurance credit'
means the credit allowable under subsection (a) by reason of
section 45G(a).''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by striking ``(other'' and all
that follows through ``credit)'' and inserting ``(other than
the empowerment zone employment credit or the employee health
insurance credit)''.
(d) No Carrybacks.--Subsection (d) of section 39 (relating
to carryback and carryforward of unused credits) is amended
by adding at the end the following:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the employee health
insurance expenses credit determined under section 45G may be
carried back to a taxable year ending before the date of the
enactment of section 45G.''.
(e) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
adding at the end the following:
``Sec. 45G. Employee health insurance expenses.''.
(f) Employer Outreach.--The Internal Revenue Service shall,
in conjunction with the Small Business Administration,
develop materials and implement an educational program to
ensure that business personnel are aware of--
(1) the eligibility criteria for the tax credit provided
under section 45G of the Internal Revenue Code of 1986 (as
added by this section),
(2) the methods to be used in calculating such credit,
(3) the documentation needed in order to claim such credit,
and
(4) any available health plan purchasing alliances
established under title II,
so that the maximum number of eligible businesses may claim
the tax credit.
(g) Revision of Partial Exclusion of Dividends Received By
Individuals.--Section 116(a)(2)(B), as added by section 201
of this Act, is amended by striking ``2007'' and inserting
``2009''.
(h) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid
or incurred in taxable years beginning after December 31,
2002.
(2) Revision.--The amendment made by subsection (d) shall
apply to taxable years beginning after the date of the
enactment of this Act.
______
SA 563. Mr. DASCHLE submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. REFUNDABLE TAX CREDIT FOR INITIAL HIRES OF SMALL
BUSINESSES.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 (relating to refundable credits) is amended by
redesignating section 36 as section 37 and inserting after
section 35 the following new section:
``SEC. 36. INITIAL HIRES BY SMALL BUSINESSES.
``(a) Determination of Amount.--There shall be allowed as a
credit against the tax imposed by this subtitle for the
taxable year an amount equal to 10 percent of the qualified
first-year wages for such year.
``(b) Qualified Wages Defined.--For purposes of this
section--
``(1) In general.--The term `qualified wages' means the
wages paid or incurred by a qualified small business during
the taxable year to an individual who is a qualified small
business employee.
``(2) Qualified first-year wages.--The term `qualified
first-year wages' means, with respect to a qualified small
business employee, qualified wages attributable to service
rendered during the 1-year period beginning with the day the
individual begins work for the employer.
``(3) Only first $20,000 of wages taken into account.--The
amount of the qualified first-year wages which may be taken
into account with respect to any individual shall not exceed
$20,000.
``(4) Wages.--
``(A) In general.--The term `wages' has the meaning given
such term by section 51(c).
``(B) Special rules for agricultural and railway labor.--If
such individual is an employee to whom subparagraph (A) or
(B) of section 51(h)(1) applies, rules similar to the rules
of such subparagraphs shall apply except that--
[[Page S6291]]
``(i) such subparagraph (A) shall be applied by
substituting `$20,000' for `$6,000', and
``(ii) such subparagraph (B) shall be applied by
substituting `$1,666.66' for `$500'.
``(c) Qualified Small Business Employee.--For purposes of
this section--
``(1) In general.--The term `qualified small business
employee' means the first individual hired by a qualified
small business who is not an employee within the meaning of
section 401(c)(1).
``(2) Qualified small business.--The term `qualified small
business' has the meaning given the term `small employer' by
section 4980D(d)(2), determined without regard to any minimum
number of employees.
``(d) Certain Rules To Apply.--Rules similar to the rules
of section 52, and subsections (d)(10), (f), (g), (i) (other
than paragraph (3)(A) thereof), (j), and (k) of section 51,
shall apply for purposes of this section.
``(e) Termination.--This section shall not apply to
individuals who begin work for the employer after the date
which is 1 year after the date of the enactment of the
Entrepreneurship Promotion Act of 2003.''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting before the period ``, or
from section 36 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 is amended by striking the last
item and inserting the following new items:
``Sec. 36. Initial hires by small businesses.
``Sec. 37. Overpayments of tax.''.
(c) Revision of Partial Exclusion of Dividends Received By
Individuals.--Section 116(a)(2)(B), as added by section 201
of this Act, is amended by striking ``2007'' and inserting
``2008''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to individuals
who begin work for the employer after the date of the
enactment of this Act.
(2) Revision.--The amendment made by subsection (c) shall
apply to taxable years beginning after the date of the
enactment of this Act.
______
SA 564. Mrs. MURRAY (for herself, Mr. Daschle, Mr. Baucus, Mr.
Rockefeller, Mr. Wyden, Mr. Schumer, and Mr. Corzine) submitted an
amendment intended to be proposed by her to the bill S. 1054; to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
Strike section 371 and insert the following:
SEC. 371. GENERAL REVENUE SHARING WITH STATES AND THEIR LOCAL
GOVERNMENTS.
(a) Appropriation.--There is authorized to be appropriated
and is appropriated to carry out this section $20,000,000,000
for fiscal year 2003.
(b) Allotments.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, allot to each of the States as
follows, except that no State shall receive less than \1/2\
of 1 percent of such amount:
(1) State level.--$16,000,000,000 shall be allotted among
such States on the basis of the relative population of each
such State, as determined by the Secretary on the basis of
the most recent satisfactory data.
(2) Local government level.--$4,000,000,000 shall be
allotted among such States as determined under paragraph (1)
for distribution to the various units of general local
government within such States on the basis of the relative
population of each such unit within each such State, as
determined by the Secretary on the basis of the most recent
satisfactory data.
(c) Definitions.--For purposes of this section--
(1) State.--The term ``State'' means any of the several
States, the District of Columbia, and the Commonwealth of
Puerto Rico.
(2) Unit of general local government.--
(A) In general.--The term ``unit of general local
government'' means--
(i) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(ii) the District of Columbia, the Commonwealth of Puerto
Rico, and the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(B) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
section, the rules under section 6720(c) of title 31, United
States Code, shall apply.
SEC. 371A. TEMPORARY STATE FMAP RELIEF.
(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
subsection for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
Each Calendar Quarter of Fiscal Year 2004.--Notwithstanding
any other provision of law, but subject to subsection (e), if
the FMAP determined without regard to this subsection for a
State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP
for each calendar quarter of fiscal year 2004, before the
application of this section.
(c) General 4.95 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and Each Calendar
Quarter of Fiscal Year 2004.--Notwithstanding any other
provision of law, but subject to subsections (e) and (f), for
each State for the third and fourth calendar quarters of
fiscal year 2003 and each calendar quarter of fiscal year
2004, the FMAP (taking into account the application of
subsections (a) and (b)) shall be increased by 4.95
percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and each calendar quarter of
fiscal year 2004, the amounts otherwise determined for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa under subsections (f) and (g) of section
1108 of the Social Security Act (42 U.S.C. 1308) shall each
be increased by an amount equal to 9.90 percent of such
amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4);
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.); or
(3) the percentage described in the third sentence of
section 1905(b) of the Social Security Act (42 U.S.C.
1396d(b)) (relating to amounts expended as medical assistance
for services received through an Indian Health Service
facility whether operated by the Indian Health Service or by
an Indian tribe or tribal organization (as defined in section
4 of the Indian Health Care Improvement Act)).
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on July 1, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after July 1, 2003, but prior to the date of enactment
of this Act is eligible for an increase in its FMAP under
subsection (c) or an increase in a cap amount under
subsection (d) in the first calendar quarter (and any
subsequent calendar quarters) in which the State has
reinstated eligibility that is no more restrictive than the
eligibility under such plan (or waiver) as in effect on July
1, 2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of October 1, 2004, this section
is repealed.
SEC. 371B. ELIMINATION OF 20 PERCENT PARTIAL EXCLUSION OF
DIVIDENDS RECEIVED BY INDIVIDUALS.
Section 116(a)(2)(B), as added by section 201 of this Act,
is amended by striking ``(20 percent in the case of taxable
years beginning after 2007)''.
______
SA 565. Mr. SPECTER submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V add the following:
SEC. . FLAT TAX.
(a) Findings.--The Senate finds the following:
(1) The current Internal Revenue Code, with it myriad
deductions, credits and schedules, and over 17,000 pages of
rules and regulations, is long overdue for an overhaul.
(2) The current Internal Revenue Code has over
6,900,000,000 words compared to the bible at 1,773,000 words
the Declaration of Independence at 1,300 words, The
Gettysburg Address at 267 words, and the Pledge of Allegiance
at only 31 words.
[[Page S6292]]
(3) It is an unacceptable waste of our nation's precious
resources when Americans spend more than 5,800,000,000 hours
every year compiling information and filling out Internal
Revenue Code tax forms. In addition, taxpayers spend
$194,000,000,000 each year in tax code compliance. America's
resources could be dedicated to far more productive pursuits.
(4) The primary goal of any tax reform is to promote growth
and remove the inefficiencies of the current tax code. The
flat tax will expand the economy by an estimated $2 trillion
over seven years.
(5) Another important goal of the flat tax is to achieve
fairness, with a single low flat tax rate for all individuals
and businesses.
(6) Simplicity is another critically important goal of the
flat tax, and it is in the public interest to have a ten-
lined tax form that fits on a postcard and takes 10 minutes
to fill out.
(7) A comprehensive analysis of our tax structure has
concluded that a flat tax of 19 percent could be imposed upon
individuals and be revenue neutral.
(8) If the decision is made to include deductibility on
items such as interest on home mortgages and charitable
contributions, the flat tax would be raised from a 19 percent
to a 20 percent rate to accommodate the deductions and remain
revenue neutral.
(9) The flat tax would tax business at a 20 percent rate on
net profits and be revenue neutral and lead to investment
decisions being made on the basis of productivity rather than
for tax avoidance.
(10) The flat tax would lead to the elimination of the
capital gains tax. This would become a powerful incentive for
savings and investment--which translates into economic growth
and expansion, more and better jobs, and raising the standard
of living for all Americans.
(11) The flat tax would lower the cost of capital by
allowing businesses to write off the cost of capital purchase
in the same year the purchase was made as opposed to
complying with complicated depreciation schedules.
(12) By eliminating the double tax on dividends, the flat
tax eliminates the distortions in the tax code favoring debt
over equity financing by businesses.
(13) The flat tax would eliminate the estate and gift tax.
With the elimination of the estate and gift tax, family-held
businesses will be much more stable under the flat tax
system.
(14) As tax loopholes are eliminated and the tax code is
simplified, there will be far less opportunity for tax
avoidance and fraud, which now amounts to over $120 billion
in uncollected revenue annually.
(b) Sense of the Senate.--It is the sense of the Senate
that--
(1) the Senate Finance Committee and the Joint Economic
Committee should undertake a comprehensive analysis of flat
tax proposals, including appropriate hearings and consider
legislation providing for a flat tax.
______
SA 566. Mr. BREAUX submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
secion 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
On page 19, between lines 12 and 13, strike ``10 percent
(20 percent in the case of taxable years beginning after
2007)'' and insert ``5 percent''.
On page 26, strike lines 17 through 22, and insert:
(4) Section 531(a) is amended by inserting ``95 percent
of'' after ``equal to''.
(5) Section 541(a) is amended by inserting ``95 percent
of'' after ``equal to''.
Strike section 350.
______
SA 567. Mr. BIDEN submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
secion 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V, add the
following:
SEC. ____. CONFORMING THE INTERNAL REVENUE CODE OF 1986 TO
REQUIREMENTS IMPOSED BY THE WOMEN'S HEALTH AND
CANCER RIGHTS ACT OF 1998.
(a) In General.--Subchapter B of chapter 100 (relating to
other requirements) is amended by inserting after section
9812 the following new section:
``SEC. 9813. REQUIRED COVERAGE FOR RECONSTRUCTIVE SURGERY
FOLLOWING MASTECTOMIES.
``(a) In General.--A group health plan that provides
medical and surgical benefits with respect to a mastectomy
shall provide, in a case of a participant or beneficiary who
is receiving benefits in connection with a mastectomy and who
elects breast reconstruction in connection with such
mastectomy, coverage for--
``(1) all stages of reconstruction of the breast on which
the mastectomy has been performed,
``(2) surgery and reconstruction of the other breast to
produce a symmetrical appearance, and
``(3) prostheses and physical complications of mastectomy,
including lymphedemas,]
in a manner determined in consultation with the attending
physician and the patient. Such coverage may be subject to
annual deductibles and coinsurance provisions as may be
deemed appropriate and as are consistent with those
established for other benefits under the plan. Written notice
of the availability of such coverage shall be delivered to
the participant upon enrollment and annually thereafter.
``(b) Prohibitions.--A group health plan may not--
``(1) deny to a patient eligibility, or continued
eligibility, to enroll or to renew coverage under the terms
of the plan, solely for the purpose of avoiding the
requirements of this section, and
``(2) penalize or otherwise reduce or limit the
reimbursement of an attending provider, or provide incentives
(monetary or otherwise) to an attending provider, to induce
such provider to provide care to an individual participant or
beneficiary in a manner inconsistent with this section.
``(c) Rule of Construction.--Nothing in this section shall
be construed to prevent a group health plan from negotiating
the level and type of reimbursement with a provider for care
provided in accordance with this section.''
(b) Clerical Amendment.--The table of sections for chapter
100 of such Code is amended inserting after the item relating
to section 9812 the following new item:
``Sec. 9813. Required coverage for reconstructive surgery following
mastectomies.''
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply with respect to plan years beginning on or after the
date of enactment of this Act.
(2) Special rule for collective bargaining agreements.--In
the case of a group health plan maintained pursuant to 1 or
more collective bargaining agreements between employee
representatives and 1 or more employers, any plan amendment
made pursuant to a collective bargaining agreement relating
to the plan which amends the plan solely to conform to any
requirement added by this section shall not be treated as a
termination of such collective bargaining agreement.
______
SA 568. Mr. SCHUMER submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
Strike section 371 and insert the following:
SEC. 371. TEMPORARY STATE FISCAL RELIEF FUND.
(a) Authority To Make Payments To States.--
(1) In general.--Not later than 45 days after the date of
enactment of this Act, the Secretary of the Treasury (in this
section referred to as the ``Secretary'') shall establish a
program under which the Secretary shall make a payment to
each State in which the chief executive officer of the State,
or the chief executive officer's designee, in consultation
and coordination with other State and local officials,
notifies the Secretary not later than 6 months after the date
of enactment of this Act that the State intends to use the
payment in accordance with this section.
(2) Requirement.--In making payments to States under this
section, the Secretary shall ensure that not more than 50
percent of the aggregate amount made available for payments
under this section (after the application of subsection (f))
is paid to States in fiscal year 2003.
(b) Use of Payment.--
(1) In general.--Subject to paragraph (2), a State shall
use the funds provided under a payment made under this
section to carry out 1 or more of the following activities:
(A) Improving education or job training.
(B) Improving health care services.
(C) Improving transportation or other infrastructure.
(D) Improving law enforcement or public safety.
(E) Maintaining essential government services.
(2) Limitation.--A State may only use funds provided under
a payment made under this section for types of expenditures
permitted under the most recently approved budget for the
State.
(c) Certifications.--In order to receive a payment under
this section, the State shall provide the Secretary with
certifications that--
(1) the State's proposed uses of the funds are consistent
with subsection (b); and
(2) the State will allocate 50 percent of the funds
directly to units of general local government based on the
relative local population proportion for the State (as
defined in subsection (d)(5)) and not use the funds to
supplant State funding or revenue that the State otherwise
provides to units of general local government.
(d) Amount of Payment.--
(1) In general.--The amount of payment made to a State
under this section shall be the minimum payment amount
described in paragraph (2) plus the relative population
proportion amount described in paragraph (3).
(2) Minimum payment amount.--The minimum payment amount
described in this paragraph is--
[[Page S6293]]
(A) in the case of any of the several States, the District
of Columbia, or the Commonwealth of Puerto Rico, one-half of
1 percent of the aggregate amount made available for payments
under this section (after the application of subsection (f));
and
(B) in the case of the United States Virgin Islands, Guam,
the Commonwealth of the Northern Mariana Islands, or American
Samoa, one-tenth of 1 percent of such aggregate amount (after
the application of subsection (f)).
(3) Relative population proportion amount.--The relative
population proportion amount described in this paragraph is
the product of--
(A) the aggregate amount made available for payments under
this section (after the application of subsection (f)) minus
the total of all of the minimum payment amounts determined
under paragraph (2); and
(B) the relative State population proportion (as defined in
paragraph (4)).
(4) Relative state population proportion defined.--In this
section, the term ``relative State population proportion''
means, with respect to a State, the amount equal to the
quotient of--
(A) the population of the State (as reported in the most
recent decennial census); and
(B) the total population of all States (as reported in the
most recent decennial census).
(5) Relative local population proportion defined.--In this
section, the term ``relative local population proportion''
means, with respect to a unit of general local government
within a State, the amount equal to the quotient of--
(A) the population of such unit of general local government
(as reported in the most recent decennial census); and
(B) the total population of the State (as reported in the
most recent decennial census).
(e) Appropriation.--There is authorized to be appropriated
and is appropriated for making payments under this section,
$30,000,000,000 for fiscal year 2003. Amounts appropriated
under this subsection shall remain available for expenditure
through December 31, 2004.
(f) Temporary Increase of Medicaid FMAP.--
(1) Permitting maintenance of fiscal year 2002 fmap for
last 2 calendar quarters of fiscal year 2003.--Subject to
paragraph (5), if the FMAP determined without regard to this
subsection for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this subsection.
(2) Permitting maintenance of fiscal year 2003 fmap for
first 3 quarters of fiscal year 2004.--Subject to paragraph
(5), if the FMAP determined without regard to this subsection
for a State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP
for the first, second, and third calendar quarters of fiscal
year 2004, before the application of this subsection.
(3) General 2.95 percentage points increase for last 2
calendar quarters of fiscal year 2003 and first 3 calendar
quarters of fiscal year 2004.--Subject to paragraphs (5) and
(6), for each State for the third and fourth calendar
quarters of fiscal year 2003 and for the first, second, and
third calendar quarters of fiscal year 2004, the FMAP (taking
into account the application of paragraphs (1) and (2)) shall
be increased by 2.95 percentage points.
(4) Increase in cap on medicaid payments to territories.--
Subject to paragraph (6), with respect to the third and
fourth calendar quarters of fiscal year 2003 and the first,
second, and third calendar quarters of fiscal year 2004, the
amounts otherwise determined for Puerto Rico, the Virgin
Islands, Guam, the Northern Mariana Islands, and American
Samoa under subsections (f) and (g) of section 1108 of the
Social Security Act (42 U.S.C. 1308) shall each be increased
by an amount equal to 5.90 percent of such amounts.
(5) Scope of application.--The increases in the FMAP for a
State under this subsection shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(A) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4); or
(B) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.).
(6) State eligibility.--
(A) In general.--Subject to subparagraph (B), a State is
eligible for an increase in its FMAP under paragraph (3) or
an increase in a cap amount under paragraph (4) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(B) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, but prior to the date of
enactment of this Act is eligible for an increase in its FMAP
under paragraph (3) or an increase in a cap amount under
paragraph (4) in the first calendar quarter (and subsequent
calendar quarters) in which the State has reinstated
eligibility that is no more restrictive than the eligibility
under such plan (or waiver) as in effect on September 2,
2003.
(C) Rule of construction.--Nothing in subparagraph (A) or
(B) shall be construed as affecting a State's flexibility
with respect to benefits offered under the State medicaid
program under title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) (including any waiver under such title or under
section 1115 of such Act (42 U.S.C. 1315)).
(7) Funding.--Notwithstanding subsection (e), from the
amounts appropriated in such section for fiscal year 2003,
$10,000,000,000 of such amount is hereby transferred and made
available for the purpose of increasing the FMAP for States
in accordance with this subsection. Amounts transferred under
this paragraph shall remain available for expenditure through
September 30, 2004.
(8) Definitions.--In this subsection:
(A) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(B) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(9) Repeal of fmap increase.--Effective as of October 1,
2004, this subsection is repealed.
(g) Repeal of other provisions.--Effective as of January 1,
2005, subsections (a) through (e) of this section are
repealed.
(h) Revision of Partial Exclusion of Dividends Received By
Individuals.--
(1) In general.--Section 116(a)(2)(B), as added by section
201 of this Act, is amended by striking ``2007'' and
inserting ``2010''.
(2) Conforming amendments.--Sections 531(a) and 541(a), as
amended by section 201 of this Act, are each amended by
striking ``2007'' and inserting ``2010''.
(3) Application of sunset.--Section 601(a) of this Act
shall apply to the amendments made by paragraphs (1) and (2).
______
SA 569. Mr. SPECTER (for himself, Mr. Grassley, Mr. Bennett, and Mr.
Thomas) proposed an amendment to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; as follows:
At the end of subtitle C of title V add the following:
SEC. . FLAT TAX.
(a) Findings.--The Senate finds the following:
(1) The current Internal Revenue Code, with its myriad
deductions, credits and schedules, and over 17,000 pages of
rules and regulations, is long overdue for an overhaul.
(2) The current Internal Revenue Code has over 6,900,000
words compared to the Bible at 1,773,000 words, the
Declaration of Independence at 1,300 words, the Gettysburg
Address at 267 words, and the Pledge of Allegiance at only 31
words.
(3) It is an unacceptable waste of our nation's precious
resources when Americans spend more than 5,800,000,000 hours
every year compiling information and filling out Internal
Revenue Code tax forms. In addition, taxpayers spend
$194,000,000,000 each year in tax code compliance. America's
resources could be dedicated to far more productive pursuits.
(4) The primary goal of any tax reform is to promote growth
and remove the inefficiencies of the current tax code. The
flat tax will expand the economy by an estimated $2 trillion
over seven years.
(5) Another important goal of the flat tax is to achieve
fairness, with a single low flat tax rate for all individuals
and businesses.
(6) Simplicity is another critically important goal of the
flat tax, and it is in the public interest to have a ten-line
tax form that fits on a postcard and takes 10 minutes to fill
out.
(7) A comprehensive analyses of our tax structure has
concluded that a flat tax of 19% could be imposed upon
individuals and be revenue neutral.
(8) If the decision is made to include deductibility on
items such as interest on home mortgages and charitable
contributions, the flat tax would be raised from a 19% to a
20% rate to accommodate the deductions and remain revenue
neutral.
(9) The flat tax would tax business at a 20% rate on net
profits and be revenue neutral and lead to investment
decisions being made on the basis of productivity rather than
for tax avoidance.
(10) The flat tax would lead to the elimination of the
capital gains tax. This would become a powerful incentive for
savings and investment--which translates into economic growth
and expansion, more and better jobs, and raising the standard
of living for all Americans.
(11) The flat tax would lower the cost of capital by
allowing businesses to write off the cost of capital purchase
in the same year the purchase was made as opposed to
complying with complicated depreciation schedules.
(12) By eliminating the double tax on dividends, the flat
tax eliminates the distortions in the tax code favoring debt
over equity financing by businesses.
(13) The flat tax would eliminate the estate and gift tax.
With the elimination of the estate and gift tax, family-held
businesses will be much more stable under the flat tax
system.
[[Page S6294]]
(14) As tax loopholes are eliminated and the tax code is
simplified, there will be far less opportunity for tax
avoidance and fraud, which now amounts to over $120 billion
in uncollected revenue annually.
(b) Sense of the Senate.--It is the sense of the Senate
that--
(1) The Senate Finance Committee and the Joint Economic
Committee should undertake a comprehensive analysis of
simplification including flat tax proposals, including
appropriate hearings and consider legislation providing for a
flat tax.
______
SA 570. Mr. BAUCUS proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
On page 19, lines 12 and 13, strike ``(20 percent in the
case of taxable years beginning after 2007)''.
On page 26, lines 18 and 19, strike ``(80 percent in the
case of taxable years beginning after 2007)''.
On page 26, lines 21 and 22, strike ``(80 percent in the
case of taxable years beginning after 2007)''.
On page 27, line 19, strike ``2003'' and insert ``2002''.
At the end of subtitle C of title V, insert:
SEC. ____. GUARANTY OF ADDITIONAL $400 CHILD CREDIT FOR 2003
AND MODIFICATIONS OF DIVIDEND EXCLUSION.
(a) In General.--Section 24(d) (relating to portion of
credit refundable) is amended by adding at the end the
following new paragraph:
``(4) Special rule for 2003.--
``(A) In general.--In applying this subsection--
``(i) in the case of any taxable year beginning in 2003, or
``(ii) for purposes of determining the amount of the credit
allowed under this section for the taxpayer's first taxable
year beginning in 2002 in computing the child tax credit
refund amount under section 6429,
the increase under paragraph (1) for such taxable year shall
be determined under subparagraph (B).
``(B) Additional increase.--For purposes of subparagraph
(A), the amount of the increase under paragraph (1) for a
taxable year shall be equal to the sum of--
``(i) the amount of such increase determined without regard
to this paragraph, plus
``(ii) the lesser of--
``(I) $400, multiplied by the number of qualifying children
of the taxpayer for the taxable year, or
``(II) the amount determined under paragraph (1)(A) for the
taxable year, reduced by the amount of the credit allowed
after the application of section 26 and this subsection
(without regard to this paragraph).
For purposes of applying subclause (II) to the taxable year
described in subparagraph (A)(ii), the amount determined
under paragraph (1)(A) shall be computed by taking into
account the adjustments described in section 6429(b).''
(b) Effective Date.--The amendment made by subsection (a)
shall take effect as if included in the provisions of section
106 of this Act and section 108 of this Act shall apply to
such amendment as if it had been so included.
______
SA 571. Mr. ALLEN submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. EXPANSION OF INCOME TAX EXCLUSION FOR COMBAT ZONE
SERVICE.
(a) Combat Zone Service To Include Transit to Zone.--
Section 112(c)(3) of the Internal Revenue Code of 1986
(relating to definitions) is amended by adding at the end the
following new sentence: ``Such service shall include any
period (not to exceed 14 days) of direct transit to the
combat zone.''.
(b) Removal of Limitation on Exclusion for Commissioned
Officers.--
(1) In general.--Subsection (b) of section 112 of the
Internal Revenue Code of 1986 (relating to certain combat
zone compensation of members of the Armed Forces) is
repealed.
(2) Conforming amendments.--
(A) Section 112(a) of such Code is amended--
(i) by striking ``below the grade of commissioned
officer'', and
(ii) by striking ``Enlisted Personnel'' in the heading and
inserting ``In General''.
(B) Section 112(c) of such Code is amended by striking
paragraphs (1) and (5) and by redesignating paragraphs (2),
(3), and (4) as paragraphs (1), (2), and (3), respectively.
(c) Effective Date.--The amendments made by this section
shall apply to months beginning after December 31, 2002.
SEC. ____. AVAILABILITY OF CERTAIN TAX BENEFITS FOR MEMBERS
OF THE ARMED FORCES PERFORMING SERVICES AT
GUANTANAMO BAY NAVAL STATION, CUBA, AND ON THE
ISLAND OF DIEGO GARCIA.
(a) General Rule.--In the case of a member of the Armed
Forces of the United States who is entitled to special pay
under section 305 of title 37, United States Code (relating
to special pay: hardship duty pay), for services performed as
a member of the Joint Task Force Guantanamo at Guantanamo Bay
Naval Station, Cuba, or for services performed on the Island
of Diego Garcia as part of Operation Iraqi Freedom, such
member shall be treated in the same manner as if such
services were in a combat zone (as determined under section
112 of the Internal Revenue Code of 1986) for purposes of the
following provisions of such Code:
(1) Section 2(a)(3) (relating to special rule where
deceased spouse was in missing status).
(2) Section 112 (relating to the exclusion of certain
combat pay of members of the Armed Forces).
(3) Section 692 (relating to income taxes of members of
Armed Forces on death).
(4) Section 2201 (relating to members of the Armed Forces
dying in combat zone or by reason of combat-zone-incurred
wounds, etc.).
(5) Section 3401(a)(1) (defining wages relating to combat
pay for members of the Armed Forces).
(6) Section 4253(d) (relating to the taxation of phone
service originating from a combat zone from members of the
Armed Forces).
(7) Section 6013(f)(1) (relating to joint return where
individual is in missing status).
(8) Section 7508 (relating to time for performing certain
acts postponed by reason of service in combat zone).
(b) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), this
section shall take effect on January 1, 2003.
(2) Withholding.--Subsection (a)(5) shall apply to
remuneration paid after December 31, 2002.
______
SA 572. Mr. DODD (for himself, Mr. Kennedy, Mr. Bingaman, and Mr.
Biden) submitted an amendment intended to be proposed by him to the
bill S. 1054, to provide for reconciliation pursuant to section 201 of
the concurrent resolution on the budget for fiscal year 2004; which was
ordered to lie on the table; as follows:
On page 19, line 9, strike ``the sum of'' and all that
follows through line 15 and insert ``$500 ($250 in the case
of a married individual filing a separate return).''.
On page 18, after line 17, insert the following:
SEC. 109. ELIMINATION OF ACCELERATION OF TOP RATE REDUCTION
IN INDIVIDUAL INCOME TAX.
Notwithstanding the amendment made by section 102(a) of
this Act, in lieu of the percent specified in the last column
of the table in paragraph (2) of section 1(i) of the Internal
Revenue Code of 1986, as amended by such section 102(a), for
taxable years beginning during calendar years 2003, 2004, and
2005, the following percentages shall be substituted for such
years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
______
SA 573. Mr KYL (for himself, Mr. Cornyn, and Mr. Alexander) submitted
an amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
Strike page 96, line 1, through page 97, line 18, and
insert the following:
SEC. 333. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,
AND OTHER AMOUNTS.
(a) In General.--Subsection (f) of section 162 (relating to
trade or business expenses) is amended to read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in paragraph (2), no
deduction otherwise allowable shall be allowed under this
chapter for any amount paid or incurred (whether by suit,
agreement, or otherwise) to, or at the direction of, a
government or entity described in paragraph (3) in relation
to the violation of any law or the investigation or inquiry
into the potential violation of any law.
``(2) Exception for amounts constituting restitution.--
Paragraph (1) shall not apply to any amount which the
taxpayer establishes constitutes restitution for damage or
harm caused by the violation of any law or the potential
violation of any law. This paragraph shall not apply to any
amount paid or incurred as reimbursement to the government or
entity for the costs of any investigation or litigation.
``(3) Certain nongovernmental regulatory entities.--An
entity is described in this paragraph if it is--
``(A) a nongovernmental entity which exercises self-
regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in
section 1256(g)(7)), or
``(B) to the extent provided in regulations, a
nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.
``(4) Imposition of tax on excess fee transactions.--
``(A) In general.--There is hereby imposed on the
collecting attorney in each excess fee transaction a tax
equal to 5 percent of the excess fee.
``(B) Payment.--The tax imposed by subparagraph (A) shall
be paid by any collecting attorney referred to in paragraph
(10)(A) with respect to such transaction.
[[Page S6295]]
``(5) Penalty.--
``(A) In general.--In any case in which a tax is imposed by
paragraph (4) on an excess fee transaction and the excess fee
involved in such transaction is not corrected within the
taxable period, there is hereby imposed a penalty equal to
200 percent of the excess fee involved. The penalty imposed
by this paragraph shall be paid by any collecting attorney
referred to in paragraph (10)(A) with respect to such
transaction. The penalty imposed by this subsection shall be
treated in the same manner as a penalty imposed under
subchapter B of chapter 68.
``(B) Payment.--The penalty imposed under subparagraph (A)
shall be paid by any collecting attorney referred to in
paragraph (10)(A) with respect to such transaction.
``(6) Excess fee transaction.--For purposes of this
section--
``(A) In general.--The term `excess fee transaction' means
any transaction in which a fee is provided by an applicable
plaintiff (including payments resulting from litigation on
behalf of an applicable plaintiff determined on an hourly or
percentage basis, whether such fee is paid from the
applicable plaintiff's recovery, pursuant to a separately
negotiated agreement, or in any other manner), directly or
indirectly, to or for the use of any collecting attorney with
respect to such applicable plaintiff if the amount of the fee
provided exceeds the value of the services received in
exchange therefor or paragraph (11)(A) applies.
``(B) Determination of value.--For purposes of subparagraph
(A), in determining whether the amount of the fee provided
exceeds the value of the services received in exchange
therefor, the value of the services shall be the sum of--
``(i) the reasonable expenses incurred by the collecting
attorney in the course of the representation of the
applicable plaintiff, and
``(ii) a reasonable fee based on--
``(I) the number of hours of non-duplicative, professional
quality legal work provided by the collecting attorney of
material value to the outcome of the representation of the
applicable plaintiff, taking into account the factors
described in clauses (ii) and (iv) of paragraph (12)(B),
``(II) reasonable hourly rates for the individuals
performing such work based on hourly rates charged by other
attorneys for the rendition of comparable services, including
rates charged by adversary defense counsel in the
representation, taking into account the factors described in
clauses (i), (iii), (v), and (vii) of paragraph (12)(B), and
``(III) to the extent such items are not taken into account
in establishing the reasonable hourly rates under subclause
(II), an appropriate adjustment rate determined in accordance
with subparagraph (C) to compensate the collecting attorney
for periods of substantial risk of non-payment of fees and
for skillful or innovative services which increase the amount
of the applicable plaintiff's recovery.
``(iii) Fees in certain settlements.--For purposes of this
subparagraph, the value of services for any collecting
attorney receiving fees under the Master Settlement Agreement
shall be deemed to include a reasonable fee that is based on
a reasonable hourly rate (including appropriate adjustment
rates) of not less than $____ per hour
``(C) Adjustment rate.--
``(i) In general.--For purposes of this paragraph, an
appropriate adjustment rate is a percentage of the reasonable
hourly rate under subparagraph (B)(ii)(II) which is added to
the amount of such rate and which is not more than the sum of
one risk percentage and one skill percentage described in
clauses (ii) and (iii), respectively.
``(ii) Risk percentage.--For purposes of this subparagraph,
the term `risk percentage' means a percentage rate that is
proportional to the collecting attorney's risk of nonrecovery
of fees and which is--
``(I) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees, not more than 100
percent,
``(II) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees and devoted more than
8,000 hours of legal work (as described in subparagraph
(B)(ii)(I)) and more than 2 years to the case before
resolution of all claims, not more than 200 percent, or
``(III) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees and devoted more than
15,000 hours of legal work (as described in subparagraph
(B)(ii)(I)) and more than 4 years to the case before
resolution of all claims, not more than 300 percent.
``(iii) Skill percentage.--For purposes of this
subparagraph, the term `skill percentage' means, in the case
of a collecting attorney who has demonstrated exceptionally
skillful or innovative legal service which generated a
recovery for the applicable plaintiff substantially greater
than the typical recovery in similar cases, a percentage rate
that is proportional to the increase in the applicable
plaintiff's recovery and that is not more than 100 percent.
``(iv) Limitation.--An appropriate adjustment rate shall
not increase the collecting attorney's fee above an amount
that is proportional to the applicable plaintiff's recovery.
``(D) Court approval of fees.--Fee payments approved by any
court shall be presumed to not be in excess of the value of
the services received in exchange therefor if the court
approving the fee--
``(i) did not approve an adjustment rate greater than that
determined to be appropriate under subparagraph (C) in a case
where such fee included an adjustment rate, and
``(ii) obtained and relied upon a report of a legal
auditing firm with respect to such fee in accordance with the
procedures in paragraph (12).
``(7) Excess fee.--For purposes of this section, the term
`excess fee' means the excess referred to in paragraph
(6)(A).
``(8) Joint and several liability.--For purposes of this
section, if more than 1 person is liable for any tax or
penalty imposed by paragraph (4), all such persons shall be
jointly and severally liable for such tax or penalty.
``(9) Applicable plaintiff.--For purposes of this section,
the term `applicable plaintiff' means any person represented
by a collecting attorney with respect to a claim described in
paragraph (10)(A).
``(10) Other definitions and rules.--For purposes of this
section--
``(A) Collecting attorney.--The term `collecting attorney'
means any person engaged in the practice of law who
represents--
``(i) any governmental entity, including any State,
municipality, or political subdivision of a State, or any
person acting on such entity's behalf, including pursuant to
Federal or State Qui Tam statutes, in a claim for recoupment
of payments made or to be made by such entity to or on behalf
of any natural person by reason, directly or indirectly, of a
breach of duty that causes damage to such natural person,
``(ii) any organization described in paragraph (3) or (4)
of section 501(c) and exempt from tax under section 501(a),
in a claim for damages based on a breach of duty, whether
civil or criminal, causing damage to such organization,
``(iii) any natural person seeking to recover damages in a
claim based on breaches of duty, whether civil or criminal,
causing damage to such natural person, or
``(iv) any assignee or other holder of claims described in
clause (i), (ii), or (iii),
when 1 or more of such claims, whether or not joined in 1
action, involve the same or a coordinated group of
plaintiff's attorneys or similarly situated defendants, arise
out of the same transaction or set of facts or involve
substantially similar liability issues, and result in
settlements or judgments aggregating at least $100,000,000.
``(B) Taxable period.--The term `taxable period' means,
with respect to any excess fee transaction, the period
beginning with the date on which the transaction occurs and
ending 90 days after the earliest of--
``(i) the date of the mailing of a notice of deficiency
under section 6212 with respect to the tax imposed by
paragraph (4), or
``(ii) the date on which the tax imposed by paragraph (4)
is assessed.
``(C) Master settlement agreement.--The term `Master
Settlement Agreement' means that certain Master Settlement
Agreement of November 23, 1998, and other, concluded
Settlement Agreements based on State health care expenditures
pursuant to title XIX of the Social Security Act (42 U.S.C.
1396 et seq.), including lawsuits involving the States of
Florida, Minnesota, Mississippi, and Texas.
``(D) Correction.--
``(i) General rule.--Any excess fee transaction is
corrected by undoing the excess fee to the extent possible
and taking any additional measures necessary to place the
applicable plaintiff in a financial position not worse than
that in which such plaintiff would be if the collecting
attorney were dealing under the highest fiduciary standards.
``(ii) Payment of excess fees.--
``(I) In general.--Except as provided in subclause (II), a
collecting attorney corrects an excess fee transaction by
paying any excess fees plus interest to the applicable
plaintiff.
``(II) Certain settlements.--In the case of excess fees
arising from or related to the Master Settlement Agreement,
the collecting attorney corrects an excess fee transaction by
paying any excess fees plus interest to the Secretary of the
Treasury as trustee for the Master Settlement Agreement
Attorney Excess Fee Trust Fund. The Secretary shall
distribute 60 percent of any money paid into the Master
Settlement Agreement Attorney Excess Fee Trust Fund to the 50
States by regulations in proportion to each State's share of
the United States population.
``(iii) No waiver of fee.--No collecting attorney may avoid
imposition of any tax imposed under paragraph (4) by
transferring any portion of the excess fee or refusing to
accept any portion of the excess fee.
``(E) Limited reasonable cause.--For purposes of section
4962(a), an excess fee transaction shall not be treated as an
event which was due to reasonable cause if the amount of the
fee provided would exceed the value of the services received
in exchange therefor determined with the maximum adjustment
rate allowed under paragraph (6)(C).
``(11) Disclosure requirements.--
``(A) Treatment as excess fee.--Any fee provided after the
date of the enactment of this subsection by an applicable
plaintiff (including payments resulting from litigation on
behalf of an applicable plaintiff determined on an hourly or
percentage basis, whether such fee is paid from the
applicable plaintiff's recovery, pursuant to a separately
negotiated agreement, or in any other manner), directly or
indirectly, to or for the use
[[Page S6296]]
of any collecting attorney with respect to such applicable
plaintiff shall be deemed to be an excess fee provided in an
excess fee transaction unless the disclosure requirements
described in subparagraph (B) are met.
``(B) Contents of statement.--The disclosure requirements
of this paragraph are met for any taxable year in which a
collecting attorney receives any fees with respect to a claim
described in paragraph (10)(A), if such collecting attorney--
``(i) includes in the return of tax for such taxable year a
statement including the information described in paragraph
(6) with respect to such claim, and
``(ii) provides a statement including the information
described in paragraph (6) to the applicable plaintiff prior
to the deadline (including extensions) for filing such
return.
``(12) Legal auditing firm.--
``(A) In general.--In any case before a Federal district
court or a State court in which the court approves fees paid
to a collecting attorney, the court shall seek bids from
legal auditing firms with a specialty in reviewing attorney
billings and select 1 such legal auditing firm to review the
billing records submitted by the collecting attorney, under
the same standards the firm would use if it were hired by a
private party to review legal bills submitted to the party,
for the reasonableness of such attorney's billing patterns
and practices. The court shall require the collecting
attorney to submit billing records, cost records, and any
other information sought by such firm in its review.
``(B) Review by legal auditing firm.--In reviewing the
billing records and work performed by the collecting
attorney, the legal auditing firm shall address all relevant
matters, including--
``(i) the hourly rates of the collecting attorney compared
with the prevailing market rates for the services rendered by
the collecting attorney,
``(ii) the number of hours worked by the collecting
attorney on the case compared with other cases that the
collecting attorney worked on during the same period,
``(iii) whether the collecting attorney performed tasks
that could have been performed by attorneys with lower
billing rates,
``(iv) whether the collecting attorney used appropriate
billing methodology, including keeping contemporaneous time
records and using appropriate billing time increments,
``(v) whether particular tasks were staffed appropriately,
``(vi) whether the costs and expenses submitted by the
collecting attorney were reasonable,
``(vii) whether the collecting attorney exercised billing
judgment, and
``(viii) any other matters normally addressed by the legal
auditing firm when reviewing attorney billings for private
clients.
``(C) Filing of report; response; burden of proof.--The
court shall set a date for the filing of the report of the
legal auditing firm, and allow the collecting attorney or any
applicable plaintiff to respond to the report within a
reasonable time period. The report shall be presumed correct
unless rebutted by the collecting attorney or any applicable
plaintiff by clear and convincing evidence.
``(D) Fee for legal auditing firm.--The fee for the report
of the legal auditing firm shall be paid from the collecting
attorney's fee award, the applicable plaintiff's recovery, or
both in a manner determined by the court.
``(13) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations to prevent avoidance of
the purposes of this section and regulations requiring
recordkeeping and information reporting.''.
``(14) Declaratory judgments relating to tax on excess fee
transactions.--
``(A) In general.--In a case of actual controversy
involving--
``(i) a determination by the Secretary or the collecting
attorney with respect to the imposition of the excise tax on
excess fee transactions on such collecting attorney under
paragraph (4), or
``(ii) a failure by the Secretary or the collecting
attorney to make such a determination,
upon the filing of an appropriate pleading by an applicable
plaintiff, the Tax Court may make a declaration with respect
to such determination or failure. Any such declaration shall
have the force and effect of a decision of the Tax Court and
shall be reviewable as such.
``(B) Deferential review.--If a collecting attorney's fee
has been approved by a court in accordance with paragraph
(6)(D) or by the Secretary pursuant to this section, the Tax
Court shall review the fee only for an abuse of discretion.
``(C) Legal auditing firm.--In any petition for a
declaration referred to in subparagraph (A):
``(i) No previous report.--If a report by a legal auditing
firm that meets the requirements of paragraph (10) has not
been previously produced and relied on by another court, the
Tax Court shall hire such a legal auditing firm and rely on
its report pursuant to the procedures in paragraph (10).
``(ii) Second report.--
``(I) In general.--If a report by a legal auditing firm has
been approved by a court in accordance with this section, the
Tax Court shall hire a second legal auditing firm upon the
request of the petitioner.
``(II) Fee for report.--The Tax Court may direct the
petitioner to pay the fee for any report of a legal auditing
firm provided pursuant to subclause (I).
``(D) Time for bringing action.--No proceeding may be
initiated under this paragraph by any person until 90 days
after such person first notifies the Secretary of the excess
fee transaction with respect to which the proceeding
relates.''.
(b) Conforming Amendments.--
(A) Subsections (a), (b), and (c) of section 4963 are each
amended by inserting ``, or paragraph (4) of section 162(f)''
before the period.
(B) Subsection (e) of section 6213 is amended by inserting
``, or paragraph (4) of section 162(f) (relating to excess
fee transactions),'' before the period.
(C) Paragraphs (2) and (3) of section 7422(g) are each
amended by inserting ``162(f)(4),'' before ``4941''.
(c) Effective Date.--
(A) In general.-- Except as provided in subparagraph (B),
the amendments made by this section shall apply to amounts
paid or incurred after April 27, 2003, except that such
amendment shall not apply to amounts paid or incurred under
any binding order or agreement entered into on or before
April 27, 2003. Such exception shall not apply to an order or
agreement requiring court approval unless the approval was
obtained on or before April 27, 2003.
(B) Excess fees.--
(i) In general.--The amendments made by this section
relating to taxes and penalties on excess attorney fees shall
apply to excess fees paid after the date of enactment of this
Act.
______
SA 574. Mr KYL (for himself, Mr. Cornyn, and Mr. Alexander) submitted
an amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
Strike page 96, line 1, through page 97, line 18, and
insert the following:
SEC. 333. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,
AND OTHER AMOUNTS.
(a) In General.--Subsection (f) of section 162 (relating to
trade or business expenses) is amended to read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in paragraph (2), no
deduction otherwise allowable shall be allowed under this
chapter for any amount paid or incurred (whether by suit,
agreement, or otherwise) to, or at the direction of, a
government or entity described in paragraph (3) in relation
to the violation of any law or the investigation or inquiry
into the potential violation of any law.
``(2) Exception for amounts constituting restitution.--
Paragraph (1) shall not apply to any amount which the
taxpayer establishes constitutes restitution for damage or
harm caused by the violation of any law or the potential
violation of any law. This paragraph shall not apply to any
amount paid or incurred as reimbursement to the government or
entity for the costs of any investigation or litigation.
``(3) Certain nongovernmental regulatory entities.--An
entity is described in this paragraph if it is--
``(A) a nongovernmental entity which exercises self-
regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in
section 1256(g)(7)), or
``(B) to the extent provided in regulations, a
nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.
``(4) Imposition of tax on excess fee transactions.--
``(A) In general.--There is hereby imposed on the
collecting attorney in each excess fee transaction a tax
equal to 5 percent of the excess fee.
``(B) Payment.--The tax imposed by subparagraph (A) shall
be paid by any collecting attorney referred to in paragraph
(10)(A) with respect to such transaction.
``(5) Penalty.--
``(A) In general.--In any case in which a tax is imposed by
paragraph (4) on an excess fee transaction and the excess fee
involved in such transaction is not corrected within the
taxable period, there is hereby imposed a penalty equal to
200 percent of the excess fee involved. The penalty imposed
by this paragraph shall be paid by any collecting attorney
referred to in paragraph (10)(A) with respect to such
transaction. The penalty imposed by this subsection shall be
treated in the same manner as a penalty imposed under
subchapter B of chapter 68.
``(B) Payment.--The penalty imposed under subparagraph (A)
shall be paid by any collecting attorney referred to in
paragraph (10)(A) with respect to such transaction.
``(6) Excess fee transaction.--For purposes of this
section--
``(A) In general.--The term `excess fee transaction' means
any transaction in which a fee is provided by an applicable
plaintiff (including payments resulting from litigation on
behalf of an applicable plaintiff determined on an hourly or
percentage basis, whether such fee is paid from the
applicable plaintiff's recovery, pursuant to a separately
[[Page S6297]]
negotiated agreement, or in any other manner), directly or
indirectly, to or for the use of any collecting attorney with
respect to such applicable plaintiff if the amount of the fee
provided exceeds the value of the services received in
exchange therefor or paragraph (11)(A) applies.
``(B) Determination of value.--For purposes of subparagraph
(A), in determining whether the amount of the fee provided
exceeds the value of the services received in exchange
therefor, the value of the services shall be the sum of--
``(i) the reasonable expenses incurred by the collecting
attorney in the course of the representation of the
applicable plaintiff, and
``(ii) a reasonable fee based on--
``(I) the number of hours of non-duplicative, professional
quality legal work provided by the collecting attorney of
material value to the outcome of the representation of the
applicable plaintiff, taking into account the factors
described in clauses (ii) and (iv) of paragraph (12)(B),
``(II) reasonable hourly rates for the individuals
performing such work based on hourly rates charged by other
attorneys for the rendition of comparable services, including
rates charged by adversary defense counsel in the
representation, taking into account the factors described in
clauses (i), (iii), (v), and (vii) of paragraph (12)(B), and
``(III) to the extent such items are not taken into account
in establishing the reasonable hourly rates under subclause
(II), an appropriate adjustment rate determined in accordance
with subparagraph (C) to compensate the collecting attorney
for periods of substantial risk of non-payment of fees and
for skillful or innovative services which increase the amount
of the applicable plaintiff's recovery.
``(iii) Fees in certain settlements.--For purposes of this
subparagraph, the value of services for any collecting
attorney receiving fees under the Master Settlement Agreement
shall be deemed to include a reasonable fee that is based on
a reasonable hourly rate (including appropriate adjustment
rates) of not less than $2,000 per hour
``(C) Adjustment rate.--
``(i) In general.--For purposes of this paragraph, an
appropriate adjustment rate is a percentage of the reasonable
hourly rate under subparagraph (B)(ii)(II) which is added to
the amount of such rate and which is not more than the sum of
one risk percentage and one skill percentage described in
clauses (ii) and (iii), respectively.
``(ii) Risk percentage.--For purposes of this subparagraph,
the term `risk percentage' means a percentage rate that is
proportional to the collecting attorney's risk of nonrecovery
of fees and which is--
``(I) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees, not more than 100
percent,
``(II) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees and devoted more than
8,000 hours of legal work (as described in subparagraph
(B)(ii)(I)) and more than 2 years to the case before
resolution of all claims, not more than 200 percent, or
``(III) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees and devoted more than
15,000 hours of legal work (as described in subparagraph
(B)(ii)(I)) and more than 4 years to the case before
resolution of all claims, not more than 300 percent.
``(iii) Skill percentage.--For purposes of this
subparagraph, the term `skill percentage' means, in the case
of a collecting attorney who has demonstrated exceptionally
skillful or innovative legal service which generated a
recovery for the applicable plaintiff substantially greater
than the typical recovery in similar cases, a percentage rate
that is proportional to the increase in the applicable
plaintiff's recovery and that is not more than 100 percent.
``(iv) Limitation.--An appropriate adjustment rate shall
not increase the collecting attorney's fee above an amount
that is proportional to the applicable plaintiff's recovery.
``(D) Court approval of fees.--Fee payments approved by any
court shall be presumed to not be in excess of the value of
the services received in exchange therefor if the court
approving the fee--
``(i) did not approve an adjustment rate greater than that
determined to be appropriate under subparagraph (C) in a case
where such fee included an adjustment rate, and
``(ii) obtained and relied upon a report of a legal
auditing firm with respect to such fee in accordance with the
procedures in paragraph (12).
``(7) Excess fee.--For purposes of this section, the term
`excess fee' means the excess referred to in paragraph
(6)(A).
``(8) Joint and several liability.--For purposes of this
section, if more than 1 person is liable for any tax or
penalty imposed by paragraph (4), all such persons shall be
jointly and severally liable for such tax or penalty.
``(9) Applicable plaintiff.--For purposes of this section,
the term `applicable plaintiff' means any person represented
by a collecting attorney with respect to a claim described in
paragraph (10)(A).
``(10) Other definitions and rules.--For purposes of this
section--
``(A) Collecting attorney.--The term `collecting attorney'
means any person engaged in the practice of law who
represents--
``(i) any governmental entity, including any State,
municipality, or political subdivision of a State, or any
person acting on such entity's behalf, including pursuant to
Federal or State Qui Tam statutes, in a claim for recoupment
of payments made or to be made by such entity to or on behalf
of any natural person by reason, directly or indirectly, of a
breach of duty that causes damage to such natural person,
``(ii) any organization described in paragraph (3) or (4)
of section 501(c) and exempt from tax under section 501(a),
in a claim for damages based on a breach of duty, whether
civil or criminal, causing damage to such organization,
``(iii) any natural person seeking to recover damages in a
claim based on breaches of duty, whether civil or criminal,
causing damage to such natural person, or
``(iv) any assignee or other holder of claims described in
clause (i), (ii), or (iii),
when 1 or more of such claims, whether or not joined in 1
action, involve the same or a coordinated group of
plaintiff's attorneys or similarly situated defendants, arise
out of the same transaction or set of facts or involve
substantially similar liability issues, and result in
settlements or judgments aggregating at least $100,000,000.
``(B) Taxable period.--The term `taxable period' means,
with respect to any excess fee transaction, the period
beginning with the date on which the transaction occurs and
ending 90 days after the earliest of--
``(i) the date of the mailing of a notice of deficiency
under section 6212 with respect to the tax imposed by
paragraph (4), or
``(ii) the date on which the tax imposed by paragraph (4)
is assessed.
``(C) Master settlement agreement.--The term `Master
Settlement Agreement' means that certain Master Settlement
Agreement of November 23, 1998, and other, concluded
Settlement Agreements based on State health care expenditures
pursuant to title XIX of the Social Security Act (42 U.S.C.
1396 et seq.), including lawsuits involving the States of
Florida, Minnesota, Mississippi, and Texas.
``(D) Correction.--
``(i) General rule.--Any excess fee transaction is
corrected by undoing the excess fee to the extent possible
and taking any additional measures necessary to place the
applicable plaintiff in a financial position not worse than
that in which such plaintiff would be if the collecting
attorney were dealing under the highest fiduciary standards.
``(ii) Payment of excess fees.--
``(I) In general.--Except as provided in subclause (II), a
collecting attorney corrects an excess fee transaction by
paying any excess fees plus interest to the applicable
plaintiff.
``(II) Certain settlements.--In the case of excess fees
arising from or related to the Master Settlement Agreement,
the collecting attorney corrects an excess fee transaction by
paying any excess fees plus interest to the Secretary of the
Treasury as trustee for the Master Settlement Agreement
Attorney Excess Fee Trust Fund. The Secretary shall
distribute 60 percent of any money paid into the Master
Settlement Agreement Attorney Excess Fee Trust Fund to the 50
States by regulations in proportion to each State's share of
the United States population.
``(iii) No waiver of fee.--No collecting attorney may avoid
imposition of any tax imposed under paragraph (4) by
transferring any portion of the excess fee or refusing to
accept any portion of the excess fee.
``(E) Limited reasonable cause.--For purposes of section
4962(a), an excess fee transaction shall not be treated as an
event which was due to reasonable cause if the amount of the
fee provided would exceed the value of the services received
in exchange therefor determined with the maximum adjustment
rate allowed under paragraph (6)(C).
``(11) Disclosure requirements.--
``(A) Treatment as excess fee.--Any fee provided after the
date of the enactment of this subsection by an applicable
plaintiff (including payments resulting from litigation on
behalf of an applicable plaintiff determined on an hourly or
percentage basis, whether such fee is paid from the
applicable plaintiff's recovery, pursuant to a separately
negotiated agreement, or in any other manner), directly or
indirectly, to or for the use of any collecting attorney with
respect to such applicable plaintiff shall be deemed to be an
excess fee provided in an excess fee transaction unless the
disclosure requirements described in subparagraph (B) are
met.
``(B) Contents of statement.--The disclosure requirements
of this paragraph are met for any taxable year in which a
collecting attorney receives any fees with respect to a claim
described in paragraph (10)(A), if such collecting attorney--
``(i) includes in the return of tax for such taxable year a
statement including the information described in paragraph
(6) with respect to such claim, and
``(ii) provides a statement including the information
described in paragraph (6) to the applicable plaintiff prior
to the deadline (including extensions) for filing such
return.
``(12) Legal auditing firm.--
``(A) In general.--In any case before a Federal district
court or a State court in which the court approves fees paid
to a collecting attorney, the court shall seek bids from
legal auditing firms with a specialty in reviewing attorney
billings and select 1 such legal auditing firm to review the
billing
[[Page S6298]]
records submitted by the collecting attorney, under the same
standards the firm would use if it were hired by a private
party to review legal bills submitted to the party, for the
reasonableness of such attorney's billing patterns and
practices. The court shall require the collecting attorney to
submit billing records, cost records, and any other
information sought by such firm in its review.
``(B) Review by legal auditing firm.--In reviewing the
billing records and work performed by the collecting
attorney, the legal auditing firm shall address all relevant
matters, including--
``(i) the hourly rates of the collecting attorney compared
with the prevailing market rates for the services rendered by
the collecting attorney,
``(ii) the number of hours worked by the collecting
attorney on the case compared with other cases that the
collecting attorney worked on during the same period,
``(iii) whether the collecting attorney performed tasks
that could have been performed by attorneys with lower
billing rates,
``(iv) whether the collecting attorney used appropriate
billing methodology, including keeping contemporaneous time
records and using appropriate billing time increments,
``(v) whether particular tasks were staffed appropriately,
``(vi) whether the costs and expenses submitted by the
collecting attorney were reasonable,
``(vii) whether the collecting attorney exercised billing
judgment, and
``(viii) any other matters normally addressed by the legal
auditing firm when reviewing attorney billings for private
clients.
``(C) Filing of report; response; burden of proof.--The
court shall set a date for the filing of the report of the
legal auditing firm, and allow the collecting attorney or any
applicable plaintiff to respond to the report within a
reasonable time period. The report shall be presumed correct
unless rebutted by the collecting attorney or any applicable
plaintiff by clear and convincing evidence.
``(D) Fee for legal auditing firm.--The fee for the report
of the legal auditing firm shall be paid from the collecting
attorney's fee award, the applicable plaintiff's recovery, or
both in a manner determined by the court.
``(13) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations to prevent avoidance of
the purposes of this section and regulations requiring
recordkeeping and information reporting.''.
``(14) Declaratory judgments relating to tax on excess fee
transactions.--
``(A) In general.--In a case of actual controversy
involving--
``(i) a determination by the Secretary or the collecting
attorney with respect to the imposition of the excise tax on
excess fee transactions on such collecting attorney under
paragraph (4), or
``(ii) a failure by the Secretary or the collecting
attorney to make such a determination,
upon the filing of an appropriate pleading by an applicable
plaintiff, the Tax Court may make a declaration with respect
to such determination or failure. Any such declaration shall
have the force and effect of a decision of the Tax Court and
shall be reviewable as such.
``(B) Deferential review.--If a collecting attorney's fee
has been approved by a court in accordance with paragraph
(6)(D) or by the Secretary pursuant to this section, the Tax
Court shall review the fee only for an abuse of discretion.
``(C) Legal auditing firm.--In any petition for a
declaration referred to in subparagraph (A):
``(i) No previous report.--If a report by a legal auditing
firm that meets the requirements of paragraph (10) has not
been previously produced and relied on by another court, the
Tax Court shall hire such a legal auditing firm and rely on
its report pursuant to the procedures in paragraph (10).
``(ii) Second report.--
``(I) In general.--If a report by a legal auditing firm has
been approved by a court in accordance with this section, the
Tax Court shall hire a second legal auditing firm upon the
request of the petitioner.
``(II) Fee for report.--The Tax Court may direct the
petitioner to pay the fee for any report of a legal auditing
firm provided pursuant to subclause (I).
``(D) Time for bringing action.--No proceeding may be
initiated under this paragraph by any person until 90 days
after such person first notifies the Secretary of the excess
fee transaction with respect to which the proceeding
relates.''.
(b) Conforming Amendments.--
(A) Subsections (a), (b), and (c) of section 4963 are each
amended by inserting ``, or paragraph (4) of section 162(f)''
before the period.
(B) Subsection (e) of section 6213 is amended by inserting
``, or paragraph (4) of section 162(f) (relating to excess
fee transactions),'' before the period.
(C) Paragraphs (2) and (3) of section 7422(g) are each
amended by inserting ``162(f)(4),'' before ``4941''.
(c) Effective Date.--
(A) In general.-- Except as provided in subparagraph (B),
the amendments made by this section shall apply to amounts
paid or incurred after April 27, 2003, except that such
amendment shall not apply to amounts paid or incurred under
any binding order or agreement entered into on or before
April 27, 2003. Such exception shall not apply to an order or
agreement requiring court approval unless the approval was
obtained on or before April 27, 2003.
(B) Excess fees.--
(i) In general.--The amendments made by this section
relating to taxes and penalties on excess attorney fees shall
apply to excess fees paid after the date of enactment of this
Act.
______
SA 575. Mr KYL (for himself, Mr. Cornyn, Mr. Alexander, and Mr.
Ensign) submitted an amendment intended to be proposed by him to the
bill S. 1054, to provide for reconciliation pursuant to section 201 of
the concurrent resolution on the budget for fiscal year 2004; which was
ordered to lie on the table; as follows:
Strike page 96, line 1, through page 97, line 18, and
insert the following:
SEC. 333. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,
AND OTHER AMOUNTS.
(a) In General.--Subsection (f) of section 162 (relating to
trade or business expenses) is amended to read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in paragraph (2), no
deduction otherwise allowable shall be allowed under this
chapter for any amount paid or incurred (whether by suit,
agreement, or otherwise) to, or at the direction of, a
government or entity described in paragraph (3) in relation
to the violation of any law or the investigation or inquiry
into the potential violation of any law.
``(2) Exception for amounts constituting restitution.--
Paragraph (1) shall not apply to any amount which the
taxpayer establishes constitutes restitution for damage or
harm caused by the violation of any law or the potential
violation of any law. This paragraph shall not apply to any
amount paid or incurred as reimbursement to the government or
entity for the costs of any investigation or litigation.
``(3) Certain nongovernmental regulatory entities.--An
entity is described in this paragraph if it is--
``(A) a nongovernmental entity which exercises self-
regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in
section 1256(g)(7)), or
``(B) to the extent provided in regulations, a
nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.
``(4) Imposition of tax on excess fee transactions.--
``(A) In general.--There is hereby imposed on the
collecting attorney in each excess fee transaction a tax
equal to 5 percent of the excess fee.
``(B) Payment.--The tax imposed by subparagraph (A) shall
be paid by any collecting attorney referred to in paragraph
(10)(A) with respect to such transaction.
``(5) Penalty.--
``(A) In general.--In any case in which a tax is imposed by
paragraph (4) on an excess fee transaction and the excess fee
involved in such transaction is not corrected within the
taxable period, there is hereby imposed a penalty equal to
200 percent of the excess fee involved. The penalty imposed
by this paragraph shall be paid by any collecting attorney
referred to in paragraph (10)(A) with respect to such
transaction. The penalty imposed by this subsection shall be
treated in the same manner as a penalty imposed under
subchapter B of chapter 68.
``(B) Payment.--The penalty imposed under subparagraph (A)
shall be paid by any collecting attorney referred to in
paragraph (10)(A) with respect to such transaction.
``(6) Excess fee transaction.--For purposes of this
section--
``(A) In general.--The term `excess fee transaction' means
any transaction in which a fee is provided by an applicable
plaintiff (including payments resulting from litigation on
behalf of an applicable plaintiff determined on an hourly or
percentage basis, whether such fee is paid from the
applicable plaintiff's recovery, pursuant to a separately
negotiated agreement, or in any other manner), directly or
indirectly, to or for the use of any collecting attorney with
respect to such applicable plaintiff if the amount of the fee
provided exceeds the value of the services received in
exchange therefor or paragraph (11)(A) applies.
``(B) Determination of value.--For purposes of subparagraph
(A), in determining whether the amount of the fee provided
exceeds the value of the services received in exchange
therefor, the value of the services shall be the sum of--
``(i) the reasonable expenses incurred by the collecting
attorney in the course of the representation of the
applicable plaintiff, and
``(ii) a reasonable fee based on--
``(I) the number of hours of non-duplicative, professional
quality legal work provided by the collecting attorney of
material value to the outcome of the representation of the
applicable plaintiff, taking into account the factors
described in clauses (ii) and (iv) of paragraph (12)(B),
[[Page S6299]]
``(II) reasonable hourly rates for the individuals
performing such work based on hourly rates charged by other
attorneys for the rendition of comparable services, including
rates charged by adversary defense counsel in the
representation, taking into account the factors described in
clauses (i), (iii), (v), and (vii) of paragraph (12)(B), and
``(III) to the extent such items are not taken into account
in establishing the reasonable hourly rates under subclause
(II), an appropriate adjustment rate determined in accordance
with subparagraph (C) to compensate the collecting attorney
for periods of substantial risk of non-payment of fees and
for skillful or innovative services which increase the amount
of the applicable plaintiff's recovery.
``(iii) Fees in certain settlements.--For purposes of this
subparagraph, the value of services for any collecting
attorney receiving fees under the Master Settlement Agreement
shall be deemed to include a reasonable fee that is based on
a reasonable hourly rate (including appropriate adjustment
rates) of not less than $20,000 per hour
``(C) Adjustment rate.--
``(i) In general.--For purposes of this paragraph, an
appropriate adjustment rate is a percentage of the reasonable
hourly rate under subparagraph (B)(ii)(II) which is added to
the amount of such rate and which is not more than the sum of
one risk percentage and one skill percentage described in
clauses (ii) and (iii), respectively.
``(ii) Risk percentage.--For purposes of this subparagraph,
the term `risk percentage' means a percentage rate that is
proportional to the collecting attorney's risk of nonrecovery
of fees and which is--
``(I) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees, not more than 100
percent,
``(II) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees and devoted more than
8,000 hours of legal work (as described in subparagraph
(B)(ii)(I)) and more than 2 years to the case before
resolution of all claims, not more than 200 percent, or
``(III) in the case of a collecting attorney who assumed a
substantial risk of nonpayment of fees and devoted more than
15,000 hours of legal work (as described in subparagraph
(B)(ii)(I)) and more than 4 years to the case before
resolution of all claims, not more than 300 percent.
``(iii) Skill percentage.--For purposes of this
subparagraph, the term `skill percentage' means, in the case
of a collecting attorney who has demonstrated exceptionally
skillful or innovative legal service which generated a
recovery for the applicable plaintiff substantially greater
than the typical recovery in similar cases, a percentage rate
that is proportional to the increase in the applicable
plaintiff's recovery and that is not more than 100 percent.
``(iv) Limitation.--An appropriate adjustment rate shall
not increase the collecting attorney's fee above an amount
that is proportional to the applicable plaintiff's recovery.
``(D) Court approval of fees.--Fee payments approved by any
court shall be presumed to not be in excess of the value of
the services received in exchange therefor if the court
approving the fee--
``(i) did not approve an adjustment rate greater than that
determined to be appropriate under subparagraph (C) in a case
where such fee included an adjustment rate, and
``(ii) obtained and relied upon a report of a legal
auditing firm with respect to such fee in accordance with the
procedures in paragraph (12).
``(7) Excess fee.--For purposes of this section, the term
`excess fee' means the excess referred to in paragraph
(6)(A).
``(8) Joint and several liability.--For purposes of this
section, if more than 1 person is liable for any tax or
penalty imposed by paragraph (4), all such persons shall be
jointly and severally liable for such tax or penalty.
``(9) Applicable plaintiff.--For purposes of this section,
the term `applicable plaintiff' means any person represented
by a collecting attorney with respect to a claim described in
paragraph (10)(A).
``(10) Other definitions and rules.--For purposes of this
section--
``(A) Collecting attorney.--The term `collecting attorney'
means any person engaged in the practice of law who
represents--
``(i) any governmental entity, including any State,
municipality, or political subdivision of a State, or any
person acting on such entity's behalf, including pursuant to
Federal or State Qui Tam statutes, in a claim for recoupment
of payments made or to be made by such entity to or on behalf
of any natural person by reason, directly or indirectly, of a
breach of duty that causes damage to such natural person,
``(ii) any organization described in paragraph (3) or (4)
of section 501(c) and exempt from tax under section 501(a),
in a claim for damages based on a breach of duty, whether
civil or criminal, causing damage to such organization,
``(iii) any natural person seeking to recover damages in a
claim based on breaches of duty, whether civil or criminal,
causing damage to such natural person, or
``(iv) any assignee or other holder of claims described in
clause (i), (ii), or (iii),
when 1 or more of such claims, whether or not joined in 1
action, involve the same or a coordinated group of
plaintiff's attorneys or similarly situated defendants, arise
out of the same transaction or set of facts or involve
substantially similar liability issues, and result in
settlements or judgments aggregating at least $100,000,000.
``(B) Taxable period.--The term `taxable period' means,
with respect to any excess fee transaction, the period
beginning with the date on which the transaction occurs and
ending 90 days after the earliest of--
``(i) the date of the mailing of a notice of deficiency
under section 6212 with respect to the tax imposed by
paragraph (4), or
``(ii) the date on which the tax imposed by paragraph (4)
is assessed.
``(C) Master settlement agreement.--The term `Master
Settlement Agreement' means that certain Master Settlement
Agreement of November 23, 1998, and other, concluded
Settlement Agreements based on State health care expenditures
pursuant to title XIX of the Social Security Act (42 U.S.C.
1396 et seq.), including lawsuits involving the States of
Florida, Minnesota, Mississippi, and Texas.
``(D) Correction.--
``(i) General rule.--Any excess fee transaction is
corrected by undoing the excess fee to the extent possible
and taking any additional measures necessary to place the
applicable plaintiff in a financial position not worse than
that in which such plaintiff would be if the collecting
attorney were dealing under the highest fiduciary standards.
``(ii) Payment of excess fees.--
``(I) In general.--Except as provided in subclause (II), a
collecting attorney corrects an excess fee transaction by
paying any excess fees plus interest to the applicable
plaintiff.
``(II) Certain settlements.--In the case of excess fees
arising from or related to the Master Settlement Agreement,
the collecting attorney corrects an excess fee transaction by
paying any excess fees plus interest to the Secretary of the
Treasury as trustee for the Master Settlement Agreement
Attorney Excess Fee Trust Fund. The Secretary shall
distribute 60 percent of any money paid into the Master
Settlement Agreement Attorney Excess Fee Trust Fund to the 50
States by regulations in proportion to each State's share of
the United States population.
``(iii) No waiver of fee.--No collecting attorney may avoid
imposition of any tax imposed under paragraph (4) by
transferring any portion of the excess fee or refusing to
accept any portion of the excess fee.
``(E) Limited reasonable cause.--For purposes of section
4962(a), an excess fee transaction shall not be treated as an
event which was due to reasonable cause if the amount of the
fee provided would exceed the value of the services received
in exchange therefor determined with the maximum adjustment
rate allowed under paragraph (6)(C).
``(11) Disclosure requirements.--
``(A) Treatment as excess fee.--Any fee provided after the
date of the enactment of this subsection by an applicable
plaintiff (including payments resulting from litigation on
behalf of an applicable plaintiff determined on an hourly or
percentage basis, whether such fee is paid from the
applicable plaintiff's recovery, pursuant to a separately
negotiated agreement, or in any other manner), directly or
indirectly, to or for the use of any collecting attorney with
respect to such applicable plaintiff shall be deemed to be an
excess fee provided in an excess fee transaction unless the
disclosure requirements described in subparagraph (B) are
met.
``(B) Contents of statement.--The disclosure requirements
of this paragraph are met for any taxable year in which a
collecting attorney receives any fees with respect to a claim
described in paragraph (10)(A), if such collecting attorney--
``(i) includes in the return of tax for such taxable year a
statement including the information described in paragraph
(6) with respect to such claim, and
``(ii) provides a statement including the information
described in paragraph (6) to the applicable plaintiff prior
to the deadline (including extensions) for filing such
return.
``(12) Legal auditing firm.--
``(A) In general.--In any case before a Federal district
court or a State court in which the court approves fees paid
to a collecting attorney, the court shall seek bids from
legal auditing firms with a specialty in reviewing attorney
billings and select 1 such legal auditing firm to review the
billing records submitted by the collecting attorney, under
the same standards the firm would use if it were hired by a
private party to review legal bills submitted to the party,
for the reasonableness of such attorney's billing patterns
and practices. The court shall require the collecting
attorney to submit billing records, cost records, and any
other information sought by such firm in its review.
``(B) Review by legal auditing firm.--In reviewing the
billing records and work performed by the collecting
attorney, the legal auditing firm shall address all relevant
matters, including--
``(i) the hourly rates of the collecting attorney compared
with the prevailing market rates for the services rendered by
the collecting attorney,
``(ii) the number of hours worked by the collecting
attorney on the case compared with other cases that the
collecting attorney worked on during the same period,
[[Page S6300]]
``(iii) whether the collecting attorney performed tasks
that could have been performed by attorneys with lower
billing rates,
``(iv) whether the collecting attorney used appropriate
billing methodology, including keeping contemporaneous time
records and using appropriate billing time increments,
``(v) whether particular tasks were staffed appropriately,
``(vi) whether the costs and expenses submitted by the
collecting attorney were reasonable,
``(vii) whether the collecting attorney exercised billing
judgment, and
``(viii) any other matters normally addressed by the legal
auditing firm when reviewing attorney billings for private
clients.
``(C) Filing of report; response; burden of proof.--The
court shall set a date for the filing of the report of the
legal auditing firm, and allow the collecting attorney or any
applicable plaintiff to respond to the report within a
reasonable time period. The report shall be presumed correct
unless rebutted by the collecting attorney or any applicable
plaintiff by clear and convincing evidence.
``(D) Fee for legal auditing firm.--The fee for the report
of the legal auditing firm shall be paid from the collecting
attorney's fee award, the applicable plaintiff's recovery, or
both in a manner determined by the court.
``(13) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
this section, including regulations to prevent avoidance of
the purposes of this section and regulations requiring
recordkeeping and information reporting.''.
``(14) Declaratory judgments relating to tax on excess fee
transactions.--
``(A) In general.--In a case of actual controversy
involving--
``(i) a determination by the Secretary or the collecting
attorney with respect to the imposition of the excise tax on
excess fee transactions on such collecting attorney under
paragraph (4), or
``(ii) a failure by the Secretary or the collecting
attorney to make such a determination,
upon the filing of an appropriate pleading by an applicable
plaintiff, the Tax Court may make a declaration with respect
to such determination or failure. Any such declaration shall
have the force and effect of a decision of the Tax Court and
shall be reviewable as such.
``(B) Deferential review.--If a collecting attorney's fee
has been approved by a court in accordance with paragraph
(6)(D) or by the Secretary pursuant to this section, the Tax
Court shall review the fee only for an abuse of discretion.
``(C) Legal auditing firm.--In any petition for a
declaration referred to in subparagraph (A):
``(i) No previous report.--If a report by a legal auditing
firm that meets the requirements of paragraph (10) has not
been previously produced and relied on by another court, the
Tax Court shall hire such a legal auditing firm and rely on
its report pursuant to the procedures in paragraph (10).
``(ii) Second report.--
``(I) In general.--If a report by a legal auditing firm has
been approved by a court in accordance with this section, the
Tax Court shall hire a second legal auditing firm upon the
request of the petitioner.
``(II) Fee for report.--The Tax Court may direct the
petitioner to pay the fee for any report of a legal auditing
firm provided pursuant to subclause (I).
``(D) Time for bringing action.--No proceeding may be
initiated under this paragraph by any person until 90 days
after such person first notifies the Secretary of the excess
fee transaction with respect to which the proceeding
relates.''.
(b) Conforming Amendments.--
(A) Subsections (a), (b), and (c) of section 4963 are each
amended by inserting ``, or paragraph (4) of section 162(f)''
before the period.
(B) Subsection (e) of section 6213 is amended by inserting
``, or paragraph (4) of section 162(f) (relating to excess
fee transactions),'' before the period.
(C) Paragraphs (2) and (3) of section 7422(g) are each
amended by inserting ``162(f)(4),'' before ``4941''.
(c) Effective Date.--
(A) In general.-- Except as provided in subparagraph (B),
the amendments made by this section shall apply to amounts
paid or incurred after April 27, 2003, except that such
amendment shall not apply to amounts paid or incurred under
any binding order or agreement entered into on or before
April 27, 2003. Such exception shall not apply to an order or
agreement requiring court approval unless the approval was
obtained on or before April 27, 2003.
(B) Excess fees.--
(i) In general.--The amendments made by this section
relating to taxes and penalties on excess attorney fees shall
apply to excess fees paid after the date of enactment of this
Act.
______
SA 576. Mr. DASCHLE submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. HEALTH CARE RESERVE FUND.
(a) Reserve Fund.--There is hereby established in the
Treasury of the United States a reserve fund to address the
high costs of health care and the uninsured to which is
appropriated the revenues resulting from the application of
subsections (b) and (c).
(b) Repeal of Partial Exclusion of Dividends.--Section 201
of this Act, and the amendments made by such section, are
repealed.
(c) Elimination of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar years 2003, 2004, and 2005, the following
percentages shall be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(d) Effective Date.--The provisions of, and amendments made
by, this section shall apply to taxable years beginning after
December 31, 2002.
______
SA 577. Ms. CANTWELL (for herself, Mr. Nelson, of Florida, Mr.
Baucus, and Mrs. Boxer) submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; as follows:
Strike title II and insert the following:
TITLE II--RESEARCH CREDIT
SEC. 201. PERMANENT EXTENSION OF RESEARCH CREDIT.
(a) In General.--Section 41 (relating to credit for
increasing research activities) is amended by striking
subsection (h).
(b) Conforming Amendment.--Paragraph (1) of section 45C(b)
is amended by striking subparagraph (D).
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
SEC. 202. INCREASE IN RATES OF ALTERNATIVE INCREMENTAL
CREDIT.
(a) In General.--Subparagraph (A) of section 41(c)(4)
(relating to election of alternative incremental credit) is
amended--
(1) by striking ``2.65 percent'' and inserting ``3
percent'',
(2) by striking ``3.2 percent'' and inserting ``4
percent'', and
(3) by striking ``3.75 percent'' and inserting ``5
percent''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 203. ALTERNATIVE SIMPLIFIED CREDIT FOR QUALIFIED
RESEARCH EXPENSES.
(a) In General.--Subsection (c) of section 41 (relating to
base amount) is amended by redesignating paragraphs (5) and
(6) as paragraphs (6) and (7), respectively, and by inserting
after paragraph (4) the following new paragraph:
``(5) Election of alternative simplified credit.--
``(A) In general.--At the election of the taxpayer, the
credit determined under subsection (a)(1) shall be equal to
12 percent of so much of the qualified research expenses for
the taxable year as exceeds 50 percent of the average
qualified research expenses for the 3 taxable years preceding
the taxable year for which the credit is being determined.
``(B) Special rule in case of no qualified research
expenses in any of 3 preceding taxable years.--
``(i) Taxpayers to which subparagraph applies.--The credit
under this paragraph shall be determined under this
subparagraph if the taxpayer has no qualified research
expenses in any 1 of the 3 taxable years preceding the
taxable year for which the credit is being determined.
``(ii) Credit rate.--The credit determined under this
subparagraph shall be equal to 6 percent of the qualified
research expenses for the taxable year.
``(C) Election.--An election under this paragraph shall
apply to the taxable year for which made and all succeeding
taxable years unless revoked with the consent of the
Secretary. An election under this paragraph may not be made
for any taxable year to which an election under paragraph (4)
applies.''.
(b) Coordination With Election of Alternative Incremental
Credit.--
(1) In general.--Section 41(c)(4)(B) (relating to election)
is amended by adding at the end the following: ``An election
under this paragraph may not be made for any taxable year to
which an election under paragraph (5) applies.''.
(2) Transition rule.--In the case of an election under
section 41(c)(4) of the Internal Revenue Code of 1986 which
applies to the taxable year which includes the date of the
enactment of this Act, such election shall be treated as
revoked with the consent of the Secretary of the Treasury if
the taxpayer makes an election under section 41(c)(5) of such
Code (as added by subsection (a)) for such year.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
______
SA 578. Mrs. LINCOLN (for herself, Mr. Rockefeller, Mr. Bingaman, Mr.
[[Page S6301]]
Breaux, Mr. Daschle, Mr. Levin, Ms. Cantwell, Mr. Pryor, Mr. Kerry, Mr.
Kennedy, and Mr. Dodd) proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. FURTHER EXPANSION OF CHILD TAX CREDIT
REFUNDABILITY.
(a) Expansion of Child Tax Credits.--
(1) In general.--Clause (i) of section 24(d)(1)(B)
(relating to portion of credit refundable), as amended by
section 106(b) of this Act, is amended to read as follows:
``(i) the sum of--
``(I) 5 percent of so much of the taxpayer's earned income
(within the meaning of section 32) as is taken into account
in computing taxable income for the taxable year which
exceeds $5,000 and is less than $13,250, and
``(II) 15 percent of so much of the taxpayer's earned
income (within the meaning of section 32) as is taken into
account in computing taxable income for the taxable year
which is more than $13,250, or''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(3) Application of EGTRRA.--The amendment made by this
subsection shall be subject to title IX of the Economic
Growth and Tax Relief Reconciliation Act of 2001 to the same
extent and in the same manner as the provision of such Act to
which such amendment relates.
(b) Delay of Dividend Exclusion.--Subparagraph (B) of
section 116(a)(2) (relating to partial exclusion of dividends
by individuals), as amended by section 201 of this Act, is
amended by striking ``2007'' and inserting ``2010''.
______
SA 579. Ms. LANDRIEU (for herself, Mr. Corzine, and Mr.
Schumer) submitted an amendment intended to be proposed by
her to the bill S. 1054, to provide for reconciliation
pursuant to section 201 of the concurrent resolution on the
budget for fiscal year 2004; which was ordered to lie on the
table; as follows:
Strike all after the enacting clause and insert the
following
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Jobs and
Growth Reconciliation Tax Relief Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I--WAGE TAX RELIEF
Sec. 101. Refund of employee payroll taxes.
Sec. 102. Refund of employer payroll taxes on first $10,000 of wages
per employee.
TITLE II--ASSISTANCE TO STATES
Sec. 201. Temporary increase of medicaid FMAP.
Sec. 202. One-time revenue grant to States and local governments.
Sec. 203. Additional advance refundings of certain governmental bonds.
TITLE III--TAX RELIEF FOR FAMILIES
Sec. 301. Acceleration of increase in standard deduction for married
taxpayers filing joint returns.
Sec. 302. Acceleration of 15-percent individual income tax rate bracket
expansion for married taxpayers filing joint returns.
Sec. 303. Acceleration of increase in child tax credit
Sec. 304. Application of EGTRRA sunset to this title.
TITLE IV--TAX RELIEF FOR BUSINESS
Sec. 401. Increased expensing for small business.
Sec. 402. Small business tax credit for 50 percent of health premiums.
Sec. 403. Ready Reserve-National Guard employee credit added to general
business credit.
Sec. 404. Renewal community employers may qualify for employment credit
by employing residents of certain other renewal
communities.
TITLE V--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
Sec. 501. Extension of the Temporary Extended Unemployment Compensation
Act of 2002.
Sec. 502. Entitlement to additional weeks of temporary extended
unemployment compensation.
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
Sec. 511. Federal-State agreements.
Sec. 512. Payments to States having agreements under this title.
Sec. 513. Financing provisions.
Sec. 514. Definitions.
Sec. 515. Applicability.
Sec. 516. Coordination with the Temporary Extended Unemployment
Compensation Act of 2002.
Subtitle C--Railroad Unemployment Insurance
Sec. 517. Temporary increase in extended unemployment benefits under
the Railroad Unemployment Insurance Act.
TITLE VI--OTHER PROVISIONS
Subtitle A--Provisions Designed To Curtail Tax Shelters
Sec. 601. Clarification of economic substance doctrine.
Sec. 602. Penalty for failing to disclose reportable transaction.
Sec. 603. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 604. Penalty for understatements attributable to transactions
lacking economic substance, etc.
Sec. 605. Modifications of substantial understatement penalty for
nonreportable transactions.
Sec. 606. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 607. Disclosure of reportable transactions.
Sec. 608. Modifications to penalty for failure to register tax
shelters.
Sec. 609. Modification of penalty for failure to maintain lists of
investors.
Sec. 610. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 611. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 612. Penalty on failure to report interests in foreign financial
accounts.
Sec. 613. Frivolous tax submissions.
Sec. 614. Penalty on promoters of tax shelters.
Sec. 615. Statute of limitations for taxable years for which listed
transactions not reported.
Sec. 616. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Subtitle B--Enron-Related Tax Shelter Provisions
Sec. 621. Limitation on transfer or importation of built-in losses.
Sec. 622. No reduction of basis under section 734 in stock held by
partnership in corporate partner.
Sec. 623. Repeal of special rules for FASITS.
Sec. 624. Expanded disallowance of deduction for interest on
convertible debt.
Sec. 625. Expanded authority to disallow tax benefits under section
269.
Sec. 626. Modifications of certain rules relating to controlled foreign
corporations.
Subtitle C--Provisions to Discourage Corporate Expatriation
Sec. 631. Tax treatment of inverted corporate entities.
Sec. 632. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 633. Reinsurance of United States risks in foreign jurisdictions.
Subtitle D--Imposition of Customs User Fees
Sec. 641. Customs user fees.
TITLE VII--SUNSET
Sec. 701. Sunset.
TITLE I--WAGE TAX RELIEF
SEC. 101. REFUND OF EMPLOYEE PAYROLL TAXES.
(a) Payment of Refunds.--
(1) In general.--The Secretary of the Treasury shall pay,
out of any money in the Treasury not otherwise appropriated,
to each individual an amount equal to the lesser of--
(A) $765, or
(B) the amount of the individual's social security taxes
for 2001.
(2) Payment in installments.--The Secretary of the Treasury
shall make the payment under paragraph (1) in two equal
installments--
(A) the first of which shall be paid on the date which is 2
months after the date of the enactment of this Act, and
(B) the second of which shall be paid on December 1, 2003.
The Secretary may, after notice to the Senate and House of
Representatives, make adjustments in the timing of each
installment to the extent the adjustments are
administratively necessary.
(3) No interest.--No interest shall be allowed on any
payment required by this subsection.
(4) Certain individuals not eligible.--No payment shall be
made under this subsection to--
(A) any estate or trust,
(B) any nonresident alien, or
(C) any individual with respect to whom a deduction under
section 151 of such Code is allowable to another taxpayer for
a taxable year beginning in 2001.
(5) Social security taxes.--For purposes of this
subsection--
(A) In general.--The term ``social security taxes'' has the
meaning given such term by section 24(d)(2) of the Internal
Revenue Code of 1986.
[[Page S6302]]
(B) State and local employees not covered by social
security system.--In the case of any individual--
(i) whose service is not treated as employment by reason of
section 3121(b)(7) of such Code (relating to exemption for
State and local employees), and
(ii) who, without regard to this subparagraph, has no
social security taxes for 2001,
the term ``social security taxes'' shall include the
individual's employee contributions to a governmental pension
plan by reason of the service described in clause (i).
(b) 2002 Refund for Individuals Not Receiving Full 2001
Refund.--Subchapter B of chapter 65 (relating to abatements,
credits, and refunds) is amended by adding at the end the
following new section:
``SEC. 6429. REFUND OF CERTAIN 2002 PAYROLL TAXES.
``(a) In General.--Each eligible individual shall be
treated as having made a payment against the tax imposed by
chapter 1 for such individual's first taxable year beginning
in 2002 in an amount equal to the payroll tax refund amount
for such taxable year.
``(b) Payroll Tax Refund Amount.--For purposes of
subsection (a), the payroll tax refund amount is the excess
(if any) of--
``(1) the lesser of--
``(A) $765, or
``(B) the amount of the individual's social security taxes
for 2002, over
``(2) the amount of the payment to the individual under
section 101(a) of the Jobs and Growth Reconciliation Tax
Relief Act of 2003.
``(c) Eligible Individual.--For purposes of this section,
the term `eligible individual' means any individual other
than--
``(1) any estate or trust,
``(2) any nonresident alien, or
``(3) any individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable
year beginning in 2002.
``(d) Timing of Payments.--In the case of any overpayment
attributable to this section, the Secretary shall, subject to
the provisions of this title, refund or credit such
overpayment as rapidly as possible and, to the extent
practicable, before December 31, 2003.
``(e) No Interest.--No interest shall be allowed on any
overpayment attributable to this section.
``(f) Social Security Taxes.--For purposes of this section,
the term `social security taxes' has the meaning given such
term by section 101(a)(5) of the Jobs and Growth
Reconciliation Tax Relief Act of 2003.''
(c) Clerical Amendment.--The table of sections for
subchapter B of chapter 65 of such Code is amended by adding
at the end the following new item:
``Sec. 6429. Refund of certain 2002 payroll taxes.''
SEC. 102. REFUND OF EMPLOYER PAYROLL TAXES ON FIRST $10,000
OF WAGES PER EMPLOYEE.
(a) In General.--Subchapter B of chapter 65 (relating to
abatements, credits, and refunds), as amended by section 101,
is amended by adding at the end the following:
``SEC. 6430. REFUND OF EMPLOYER PAYROLL TAXES ON FIRST
$10,000 OF WAGES OF AN EMPLOYEE.
``(a) General Rule.--Each employer subject to tax under
section 3111 or 3221(a) with respect to employment during the
payroll tax holiday period shall be treated as having made a
payment against the tax imposed by chapter 1 for each taxable
year which includes any portion of such period in an amount
equal to the sum of the payroll tax refund amounts determined
for all employees of the employer for such taxable year.
``(b) Payroll Tax Refund Amount.--For purposes of this
section, the term `payroll tax refund amount' means, with
respect to any employee for any taxable year of an employer,
the excess (if any) of--
``(1) the lesser of--
``(A) $765, or
``(B) the amount of the employer's social security taxes
paid or incurred with respect to employment of the employee
during any portion of the payroll tax holiday period within
the taxable year, over
``(2) the amount treated as paid by the employer under this
section with respect to the employee for any preceding
taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Payroll tax holiday period.--The term `payroll tax
holiday period' means the 12-month period beginning with the
first month following the date of the enactment of this
section. The Secretary may, after notice to the Senate and
House of Representatives, delay the beginning of such period
if the Secretary determines such delay is administratively
necessary to provide adequate notice of the provisions of
this section to employers and employees.
``(2) Employer payroll taxes.--
``(A) In general.--The term `employer payroll taxes' means
the taxes imposed by sections 3111 and 3221(a).
``(B) Special rule.--A rule similar to the rule of section
24(d)(2)(C) shall apply for purposes of subparagraph (A).
``(3) Employment.--The term `employment' includes services
subject to tax under chapter 22 (relating to railroad
retirement taxes).
``(d) Special Rules.--For purposes of this section--
``(1) Common control.--All employers treated as a single
employer under subsection (a) or (b) of section 52 shall be
treated as a single employer for purposes of this section.
``(2) Trade or business requirement.--This section shall
not apply to employer payroll taxes paid with respect to an
employee unless more than one-half of the employee's
remuneration is for services performed in a trade or business
of the employer. Any determination under this subparagraph
shall be made without regard to subsections (a) and (b) of
section 52.''
(b) Conforming Amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end
the following new item:
``Sec. 6430. Refund of employer payroll taxes on first $10,000 of wages
of an employee.''
TITLE II--ASSISTANCE TO STATES
SEC. 201. TEMPORARY INCREASE OF MEDICAID FMAP.
(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
section for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
Fiscal Year 2004.--Notwithstanding any other provision of
law, but subject to subsection (e), if the FMAP determined
without regard to this section for a State for fiscal year
2004 is less than the FMAP as so determined for fiscal year
2003, the FMAP for the State for fiscal year 2003 shall be
substituted for the State's FMAP for each calendar quarter of
fiscal year 2004, before the application of this section.
(c) General 2.45 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and Fiscal Year 2004.--
Notwithstanding any other provision of law, but subject to
subsections (e) and (f), for each State for the third and
fourth calendar quarters of fiscal year 2003 and each
calendar quarter of fiscal year 2004, the FMAP (taking into
account the application of subsections (a) and (b)) shall be
increased by 2.45 percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and each calendar quarter of
fiscal year 2004, the amounts otherwise determined for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa under subsections (f) and (g) of section
1108 of the Social Security Act (42 U.S.C. 1308) shall each
be increased by an amount equal to 4.90 percent of such
amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4); or
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.).
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, but prior to the date of
enactment of this Act is eligible for an increase in its FMAP
under subsection (c) or an increase in a cap amount under
subsection (d) in the first calendar quarter (and subsequent
calendar quarters) in which the State has reinstated
eligibility that is no more restrictive than the eligibility
under such plan (or waiver) as in effect on September 2,
2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of October 1, 2004, this section
is repealed.
SEC. 202. ONE-TIME REVENUE GRANT TO STATES AND LOCAL
GOVERNMENTS.
(a) Appropriation.--There is authorized to be appropriated
and is appropriated to carry out this section $30,000,000,000
for fiscal year 2003.
[[Page S6303]]
(b) Payments to States.--
(1) In general.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, pay with respect to a State, the sum
of the amounts determined for the State under paragraphs (2),
(3), and (4).
(2) Funding to meet the requirements of the no child left
behind act.--$7,500,000,000 shall be paid to States in the
same manner as allocations are made with respect to States
under section 1122 of the Elementary and Secondary Education
Act of 1965 (20 U.S.C. 6332).
(3) Funding for child care for low-income families.--
$3,000,000,000 shall be paid to States in the same manner as
allocations are made with respect to States under section
658O of the Child Care and Development Block Grant Act of
1990 (42 U.S.C. 9858m).
(4) Funding for other state priorities.--
(A) 50 percent based on population.--$4,875,000,000 shall
be allotted among such States on the basis of the relative
population of each such State, as determined by the Secretary
on the basis of the most recent satisfactory data.
(B) 50 percent based on change in unemployment rate.--
(i) Tier 1.--$1,220,000,000 shall be allotted among such
States which have experienced a tier 1 unemployment rate on
the basis of the relative number of unemployed individuals
for calendar year 2002 in each such State, as determined by
the Secretary on the basis of the most recent satisfactory
data.
(ii) Tier 2.--$3,655,000,000 shall be allotted among such
States which have experienced a tier 2 unemployment rate on
the basis of the relative number of unemployed individuals
for calendar year 2002 in each such State, as determined by
the Secretary on the basis of the most recent satisfactory
data.
(C) Guidelines for Use of Funds.--It is the sense of
Congress that States should use funds paid under this
paragraph for homeland security, public health, highway
construction, and the prevention of additional property and
other tax increases.
(c) Payments to Units of General Local Government.--
(1) In general.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, pay with respect to a unit of general
local government, the sum of the amounts determined for the
unit of general local government under paragraphs (2) and
(3).
(2) Percent based on population.--$4,875,000,000 shall be
allotted among such States as determined under subsection
(b)(4)(A) for distribution to the various units of general
local government within such States on the basis of the
relative population of each such unit within each such State,
as determined by the Secretary on the basis of the most
recent satisfactory data.
(3) 50 percent based on change in unemployment rate.--
(i) Tier 1.--$1,220,000,000 shall be allotted among such
States which have experienced a tier 1 unemployment rate as
determined under subsection (b)(4)(B)(i) for distribution to
the various units of general local government within such
States on the basis of the relative number of unemployed
individuals for calendar year 2002 in each such unit within
each such State, as determined by the Secretary on the basis
of the most recent satisfactory data.
(ii) Tier 2.--$3,655,000,000 shall be allotted among such
States which have experienced a tier 2 unemployment rate as
determined under subsection (b)(4)(B)(ii) for distribution to
the various units of general local government within such
States on the basis of the relative number of unemployed
individuals for calendar year 2002 in each such unit within
each such State, as determined by the Secretary on the basis
of the most recent satisfactory data.
(4) Guidelines for Use of Funds.--It is the sense of
Congress that units of general local government should use
funds paid in accordance with this subsection for homeland
security, public health, highway construction, and the
prevention of additional property and other tax increases.
(d) Definitions.--For purposes of this section--
(1) State.--The term ``State'' means any of the several
States, the District of Columbia, and the Commonwealth of
Puerto Rico.
(2) Unit of general local government.--
(A) In general.--The term ``unit of general local
government'' means--
(i) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(ii) the District of Columbia, the Commonwealth of Puerto
Rico, and the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(B) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
section, the rules under section 6720(c) of title 31, United
States Code, shall apply.
(3) Unemployment.--With respect to any State or unit of
general local government--
(A) Tier 1 unemployment rate.--The term ``tier 1
unemployment rate'' means an unemployment rate for calendar
year 2002 which was at least .4 but not more than 1.0
percentage point greater than such rate for calendar year
2000.
(B) Tier 2 unemployment rate.--The term ``tier 2
unemployment rate'' means an unemployment rate for calendar
year 2002 which was more than 1.0 percentage point greater
than such rate for calendar year 2000.
SEC. 203. ADDITIONAL ADVANCE REFUNDINGS OF CERTAIN
GOVERNMENTAL BONDS.
(a) In General.--Section 149(d)(3)(A)(i) (relating to
advance refundings of other bonds) is amended--
(1) by striking ``or'' at the end of subclause (I),
(2) by adding ``or'' at the end of subclause (II), and
(3) by inserting after subclause (II) the following:
``(III) the 2nd advance refunding of the original bond if
the original bond was issued after 1985 or the 3rd advance
refunding of the original bond if the original bond was
issued before 1986, if, in either case, the refunding bond is
issued before the date which is 2 years after the date of the
enactment of this subclause and the original bond was issued
as part of an issue 90 percent or more of the net proceeds of
which were used to finance governmental facilities used for 1
or more essential governmental functions (within the meaning
of section 141(c)(2)),''.
(b) Effective Date.--The amendments made by this section
shall apply to refunding bonds issued on or after the date of
the enactment of this Act.
TITLE III--TAX RELIEF FOR FAMILIES
SEC. 301. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR
MARRIED TAXPAYERS FILING JOINT RETURNS.
(a) In General.--Paragraph (2) of section 63(c) (relating
to basic standard deduction) is amended to read as follows:
``(2) Basic standard deduction.--For purposes of paragraph
(1), the basic standard deduction is--
``(A) 200 percent of the dollar amount in effect under
subparagraph (C) for the taxable year in the case of--
``(i) a joint return, or
``(ii) a surviving spouse (as defined in section 2(a)),
``(B) $4,400 in the case of a head of household (as defined
in section 2(b)), or
``(C) $3,000 in any other case.''.
(b) Conforming Amendments.--
(1) Section 63(c)(4) is amended by striking ``(2)(D)'' each
place it occurs and inserting ``(2)(C)''.
(2) Section 63(c) is amended by striking paragraph (7).
(3) Section 301(d) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 302. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX
RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS
FILING JOINT RETURNS.
(a) In General.--Paragraph (8) of section 1(f ) (relating
to phaseout of marriage penalty in 15-percent bracket) is
amended to read as follows:
``(8) Elimination of marriage penalty in 15-percent
bracket.--With respect to taxable years beginning after
December 31, 2002, in prescribing the tables under paragraph
(1)--
``(A) the maximum taxable income in the 15 percent rate
bracket in the table contained in subsection (a) (and the
minimum taxable income in the next higher taxable income
bracket in such table) shall be 200 percent of the maximum
taxable income in the 15-percent rate bracket in the table
contained in subsection (c) (after any other adjustment under
this subsection), and
``(B) the comparable taxable income amounts in the table
contained in subsection (d) shall be \1/2\ of the amounts
determined under subparagraph (A).''.
(b) Conforming Amendments.--
(1) The heading for subsection (f ) of section 1 is amended
by striking ``Phaseout'' and inserting ``Elimination''.
(2) Section 302(c) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 303. ACCELERATION OF INCREASE IN CHILD TAX CREDIT
(a) In General.--The table contained in section 24(a)(2)
(relating to per child amount) is amended to read as follows:
The per child amount is--e year beginning in--
2003, 2004, or 2005........................................ 800 ....
2006 or thereafter......................................1,000.''.....
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 304. APPLICATION OF EGTRRA SUNSET TO THIS TITLE.
Each amendment made by this title shall be subject to title
IX of the Economic Growth and Tax Relief Reconciliation Act
of 2001 to the same extent and in the same manner as the
provision of such Act to which such amendment relates.
TITLE IV--TAX RELIEF FOR BUSINESS
SEC. 401. INCREASED EXPENSING FOR SMALL BUSINESS.
(a) In General.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
[[Page S6304]]
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000 ($100,000 in the case of taxable
years beginning after 2002 and before 2008).''.
(b) Increase in Qualifying Investment at Which Phaseout
Begins.--Paragraph (2) of section 179(b) (relating to
reduction in limitation) is amended by inserting ``($400,000
in the case of taxable years beginning after 2002 and before
2008)'' after ``$200,000''.
(c) Off-the-Shelf Computer Software.--Paragraph (1) of
section 179(d) (defining section 179 property) is amended to
read as follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property (to which section 168 applies), or
``(ii) computer software (as defined in section
197(e)(3)(B)) which is described in section 197(e)(3)(A)(i),
to which section 167 applies, and which is placed in service
in a taxable year beginning after 2002 and before 2008,
``(B) which is section 1245 property (as defined in section
1245(a)(3)), and
``(C) which is acquired by purchase for use in the active
conduct of a trade or business.
Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating
units.''.
(d) Adjustment of Dollar Limit and Phaseout Threshold for
Inflation.--Subsection (b) of section 179 (relating to
limitations) is amended by adding at the end the following
new paragraph:
``(5) Inflation adjustments.--
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2003 and before 2008, the
$100,000 and $400,000 amounts in paragraphs (1) and (2) shall
each be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--
``(i) Dollar limitation.--If the amount in paragraph (1) as
increased under subparagraph (A) is not a multiple of $1,000,
such amount shall be rounded to the nearest multiple of
$1,000.
``(ii) Phaseout amount.--If the amount in paragraph (2) as
increased under subparagraph (A) is not a multiple of
$10,000, such amount shall be rounded to the nearest multiple
of $10,000.''.
(e) Revocation of Election.--Paragraph (2) of section
179(c) (relating to election irrevocable) is amended to read
as follows:
``(2) Revocation of election.--An election under paragraph
(1) with respect to any taxable year beginning after 2002 and
before 2008, and any specification contained in any such
election, may be revoked by the taxpayer with respect to any
property. Such revocation, once made, shall be
irrevocable.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 402. SMALL BUSINESS TAX CREDIT FOR 50 PERCENT OF HEALTH
PREMIUMS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits) is amended
by adding at the end the following:
``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the
case of a qualified small employer, the employee health
insurance expenses credit determined under this section is an
amount equal to the applicable percentage of the amount paid
by the taxpayer during the taxable year for qualified
employee health insurance expenses.
``(b) Applicable Percentage.--For purposes of subsection
(a), the applicable percentage is equal to--
``(1) 50 percent in the case of an employer with less than
26 qualified employees,
``(2) 40 percent in the case of an employer with more than
25 but less than 36 qualified employees, and
``(3) 30 percent in the case of an employer with more than
35 but less than 51 qualified employees.
``(c) Per Employee Dollar Limitation.--The amount of
qualified employee health insurance expenses taken into
account under subsection (a) with respect to any qualified
employee for any taxable year shall not exceed the maximum
employer contribution for self-only coverage or family
coverage (as applicable) determined under section 8906(a) of
title 5, United States Code, for the calendar year in which
such taxable year begins.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small employer'
means any small employer which provides eligibility for
health insurance coverage (after any waiting period (as
defined in section 9801(b)(4)) to all qualified employees of
the employer.
``(B) Small employer.--
``(i) In general.--For purposes of this paragraph, the term
`small employer' means, with respect to any calendar year,
any employer if such employer employed an average of not less
than 2 and not more than 50 qualified employees on business
days during either of the 2 preceding calendar years. For
purposes of the preceding sentence, a preceding calendar year
may be taken into account only if the employer was in
existence throughout such year.
``(ii) Employers not in existence in preceding year.--In
the case of an employer which was not in existence throughout
the 1st preceding calendar year, the determination under
clause (i) shall be based on the average number of qualified
employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee health
insurance expenses' means any amount paid by an employer for
health insurance coverage to the extent such amount is
attributable to coverage provided to any employee while such
employee is a qualified employee.
``(B) Exception for amounts paid under salary reduction
arrangements.--No amount paid or incurred for health
insurance coverage pursuant to a salary reduction arrangement
shall be taken into account under subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
paragraph (1) of section 9832(b) (determined by disregarding
the last sentence of paragraph (2) of such section).
``(3) Qualified employee.--The term `qualified employee'
means an employee of an employer who, with respect to any
period, is not provided health insurance coverage under--
``(A) a health plan of the employee's spouse,
``(B) title XVIII, XIX, or XXI of the Social Security Act,
``(C) chapter 17 of title 38, United States Code,
``(D) chapter 55 of title 10, United States Code,
``(E) chapter 89 of title 5, United States Code, or
``(F) any other provision of law.
``(4) Employee--The term `employee'--
``(A) means any individual, with respect to any calendar
year, who is reasonably expected to receive at least $5,000
of compensation from the employer during such year,
``(B) does not include an employee within the meaning of
section 401(c)(1), and
``(C) includes a leased employee within the meaning of
section 414(n).
``(5) Compensation.--The term `compensation' means amounts
described in section 6051(a)(3).
``(e) Certain Rules Made Applicable.--For purposes of this
section, rules similar to the rules of section 52 shall
apply.
``(f) Denial of Double Benefit.--No deduction or credit
under any other provision of this chapter shall be allowed
with respect to qualified employee health insurance expenses
taken into account under subsection (a).
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 2003.''.
(b) Credit To Be Part of General Business Credit.--Section
38(b) (relating to current year business credit) is amended
by striking ``plus'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following:
``(16) the employee health insurance expenses credit
determined under section 45G.''.
(c) Credit Allowed Against Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Special rules for employee health insurance credit.--
``(A) In general.--In the case of the employee health
insurance credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--
``(I) the amounts in subparagraphs (A) and (B) thereof
shall be treated as being zero, and
``(II) the limitation under paragraph (1) (as modified by
subclause (I)) shall be reduced by the credit allowed under
subsection (a) for the taxable year (other than the employee
health insurance credit).
``(B) Employee health insurance credit.--For purposes of
this subsection, the term `employee health insurance credit'
means the credit allowable under subsection (a) by reason of
section 45G(a).''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by striking ``(other'' and all
that follows through ``credit)'' and inserting ``(other than
the empowerment zone employment credit or the employee health
insurance credit)''.
(d) No Carrybacks.--Subsection (d) of section 39 (relating
to carryback and carryforward of unused credits) is amended
by adding at the end the following:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the employee health
insurance expenses credit determined under section 45G may be
carried back to a taxable year ending before the date of the
enactment of section 45G.''.
[[Page S6305]]
(e) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
adding at the end the following:
``Sec. 45G. Employee health insurance expenses.''.
(f) Employer Outreach.--The Internal Revenue Service shall,
in conjunction with the Small Business Administration,
develop materials and implement an educational program to
ensure that business personnel are aware of--
(1) the eligibility criteria for the tax credit provided
under section 45G of the Internal Revenue Code of 1986 (as
added by this section),
(2) the methods to be used in calculating such credit,
(3) the documentation needed in order to claim such credit,
and
(4) any available health plan purchasing alliances
established under title II,
so that the maximum number of eligible businesses may claim
the tax credit.
(g) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2002.
SEC. 403. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED
TO GENERAL BUSINESS CREDIT.
(a) Ready Reserve-National Guard Credit.--Subpart D of part
IV of subchapter A of chapter 1 (relating to business-related
credits), as amended by section 402, is amended by adding at
the end the following:
``SEC. 45H. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.
``(a) General Rule.--For purposes of section 38, the Ready
Reserve-National Guard employee credit determined under this
section for any taxable year is an amount equal to 50 percent
of the actual compensation amount for such taxable year.
``(b) Definition of Actual Compensation Amount.--For
purposes of this section, the term `actual compensation
amount' means the amount of compensation paid or incurred by
an employer with respect to a Ready Reserve-National Guard
employee on any day during a taxable year when the employee
was absent from employment for the purpose of performing
qualified active duty.
``(c) Limitations.--
``(1) Maximum period for credit per employee.--The maximum
period with respect to which the credit may be allowed with
respect to any Ready Reserve-National Guard employee shall
not exceed the 12-month period beginning on the first day
such credit is so allowed with respect to such employee.
``(2) Days other than work days.--No credit shall be
allowed with respect to a Ready Reserve-National Guard
employee who performs qualified active duty on any day on
which the employee was not scheduled to work (for reason
other than to participate in qualified active duty).
``(d) Definitions.--For purposes of this section--
``(1) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty, other than the training duty specified
in section 10147 of title 10, United States Code (relating to
training requirements for the Ready Reserve), or section
502(a) of title 32, United States Code (relating to required
drills and field exercises for the National Guard), in
connection with which an employee is entitled to reemployment
rights and other benefits or to a leave of absence from
employment under chapter 43 of title 38, United States Code,
and
``(B) hospitalization incident to such duty.
``(2) Compensation.--The term `compensation' means any
remuneration for employment, whether in cash or in kind,
which is paid or incurred by a taxpayer and which is
deductible from the taxpayer's gross income under section
162(a)(1).
``(3) Ready reserve-national guard employee.--The term
`Ready Reserve-National Guard employee' means an employee who
is a member of the Ready Reserve or of the National Guard.
``(4) National guard.--The term `National Guard' has the
meaning given such term by section 101(c)(1) of title 10,
United States Code.
``(5) Ready reserve.--The term `Ready Reserve' has the
meaning given such term by section 10142 of title 10, United
States Code.''.
(b) Credit To Be Part of General Business Credit.--
Subsection (b) of section 38 (relating to general business
credit), as amended by section 403, is amended by striking
``plus'' at the end of paragraph (15), by striking the period
at the end of paragraph (16) and inserting ``, plus'', and by
adding at the end the following:
``(17) the Ready Reserve-National Guard employee credit
determined under section 45H(a).''.
(c) Conforming Amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1, as amended
by section 403, is amended by adding at the end the
following:
``Sec. 45H. Ready Reserve-National Guard employee credit.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 404. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR
EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF
CERTAIN OTHER RENEWAL COMMUNITIES.
(a) In General.--Section 1400H(b)(2) (relating to
modification) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) subsection (d)(1)(B) thereof shall be applied by
substituting `such renewal community, an adjacent renewal
community within the same State as such renewal community, or
a renewal community within such State which is within 5 miles
of any border of such renewal community' for `such
empowerment zone'.''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the amendment made by
section 101(a) of the Community Renewal Tax Relief Act of
2000.
TITLE V--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
SEC. 501. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT
COMPENSATION ACT OF 2002.
(a) In General.--Section 208 of the Temporary Extended
Unemployment Compensation Act of 2002 (Public Law 107-147;
116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3),
is amended--
(1) in subsection (a)(2), by striking ``before June 1'' and
inserting ``on or before November 30'';
(2) in subsection (b)(1), by striking ``May 31, 2003'' and
inserting ``November 30, 2003'';
(3) in subsection (b)(2)--
(A) in the heading, by striking ``may 31, 2003'' and
inserting ``november 30, 2003''; and
(B) by striking ``May 31, 2003'' and inserting ``November
30, 2003''; and
(4) in subsection (b)(3), by striking ``August 30, 2003''
and inserting ``February 28, 2004''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 21).
SEC. 502. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY
EXTENDED UNEMPLOYMENT COMPENSATION.
(a) Entitlement to Additional Weeks.--
(1) In general.--Paragraph (1) of section 203(b) of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 28) is amended--
(A) in subparagraph (A), by striking ``50 percent'' and
inserting ``100 percent''; and
(B) in subparagraph (B), by striking ``13 times'' and
inserting ``26 times''.
(2) Repeal of restriction on augmentation during
transitional period.--Section 208(b) of the Temporary
Extended Unemployment Compensation Act of 2002 (Public Law
107-147), as amended by Public Law 108-1 (117 Stat. 3) and
section 301(a), is amended--
(A) in paragraph (1)--
(i) by striking ``paragraphs (2) and (3)'' and inserting
``paragraph (2)''; and
(ii) by inserting before the period at the end the
following: ``, including such compensation payable by reason
of amounts deposited in such account after such date pursuant
to the application of subsection (c) of such section'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2).
(3) Extension of transition limitation.--Section 208(b)(2)
of the Temporary Extended Unemployment Compensation Act of
2002 (Public Law 107-147), as amended by Public Law 108-1
(117 Stat. 3) and section 301(a)(4) and as redesignated by
paragraph (2), is amended by striking ``February 28, 2004''
and inserting ``May 29, 2004''.
(4) Conforming amendment for augmented benefits.--Section
203(c)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by
striking ``the amount originally established in such account
(as determined under subsection (b)(1))'' and inserting ``7
times the individual's average weekly benefit amount for the
benefit year''.
(b) Effective Date and Application.--
(1) In general.--The amendments made by subsection (a)
shall apply with respect to weeks of unemployment beginning
on or after the date of enactment this Act.
(2) TEUC-X amounts deposited in account prior to date of
enactment deemed to be the additional teuc amounts provided
by this section.--In applying the amendments made by
subsection (a) under the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26),
the Secretary of Labor shall deem any amounts deposited into
an individual's temporary extended unemployment compensation
account by reason of section 203(c) of such Act (commonly
known as ``TEUC-X amounts'') prior to the date of enactment
of this Act to be amounts deposited in such account by reason
of section 203(b) of such Act, as amended by subsection (a)
(commonly known as ``TEUC amounts'').
(3) Application to exhaustees and current beneficiaries.--
(A) Exhaustees.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) who exhausted such individual's rights to such
compensation (by reason of the payment of all amounts in such
individual's temporary extended unemployment compensation
account) before such date,
[[Page S6306]]
such individual's eligibility for any additional weeks of
temporary extended unemployment compensation by reason of the
amendments made by subsection (a) shall apply with respect to
weeks of unemployment beginning on or after the date of
enactment of this Act.
(B) Current beneficiaries.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) as to whom the condition described in subparagraph
(A)(ii) does not apply,
such individual shall be eligible for temporary extended
unemployment compensation (in accordance with the provisions
of the Temporary Extended Unemployment Compensation Act of
2002, as amended by subsection (a)) with respect to weeks of
unemployment beginning on or after the date of enactment of
this Act.
(4) Redetermination of eligibility for augmented amounts
for individuals for whom such a determination was made prior
to the date of enactment.--Any determination of whether the
individual's State is in an extended benefit period under
section 203(c) of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28)
made prior to the date of enactment of this Act shall be
disregarded and the determination under such section shall be
made as follows:
(A) Individuals who exhausted all teuc and teuc-x amounts
prior to the date of enactment.--In the case of an individual
whose temporary extended unemployment account has, prior to
the date of enactment of this Act, been both augmented under
such section 203(c) and exhausted of all amounts by which it
was so augmented, the determination shall be made as of such
date of enactment.
(B) All other individuals.--In the case of an individual
who is not described in subparagraph (A), the determination
shall be made at the time that the individual's account
established under such section 203, as amended by subsection
(a), is exhausted.
(5) No effect on provisions related to displaced airline
related workers.--The amendments made by this section and
section 301 shall have no effect on the provisions of section
4002 of the Emergency Wartime Supplemental Appropriations
Act, 2003 (Public Law 108-11).
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
SEC. 511. FEDERAL-STATE AGREEMENTS.
(a) In General.--Any State which desires to do so may enter
into and participate in an agreement under this title with
the Secretary of Labor (in this title referred to as the
``Secretary''). Any State which is a party to an agreement
under this title may, upon providing 30 days' written notice
to the Secretary, terminate such agreement.
(b) Provisions of Agreement.--
(1) In general.--Subject to paragraph (3), any agreement
under subsection (a) shall provide that the State agency of
the State, in addition to any amounts of regular compensation
to which an individual may be entitled under the State law,
shall make payments of temporary enhanced regular
unemployment compensation to an individual in an amount and
to the extent that the individual would be entitled to
regular compensation if the State law were applied with the
modifications described in paragraph (2).
(2) Modifications described.--The modifications described
in this paragraph are as follows:
(A) In the case of an individual who is not eligible for
regular compensation under the State law because of the use
of a definition of base period that does not count wages
earned in the most recently completed calendar quarter, then
eligibility for compensation shall be determined by applying
a base period ending at the close of the most recently
completed calendar quarter.
(B) In the case of an individual who is not eligible for
regular compensation under the State law because such
individual does not meet requirements relating to
availability for work, active search for work, or refusal to
accept work, because such individual is seeking, or is
available for, less than full-time work, then compensation
shall not be denied by such State to an otherwise eligible
individual who seeks less than full-time work or fails to
accept full-time work.
(3) Reduction of amounts of regular compensation available
for individuals who sought part-time work or failed to accept
full-time work.--Any agreement under subsection (a) shall
provide that the State agency of the State shall reduce the
amount of regular compensation available to an individual who
has received temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in paragraph (2)(B) by the amount of
such temporary enhanced regular unemployment compensation.
(c) Coordination Rule.--The modifications described in
subsection (b)(2) shall also apply in determining the amount
of benefits payable under any Federal law to the extent that
those benefits are determined by reference to regular
compensation payable under the State law of the State
involved.
SEC. 512. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS
TITLE.
(a) General Rule.--There shall be paid to each State which
has entered into an agreement under this title an amount
equal to--
(1) 100 percent of any temporary enhanced regular
unemployment compensation; and
(2) 100 percent of any regular compensation which is paid
to individuals by such State by reason of the fact that its
State law contains provisions comparable to the modifications
described in subparagraphs (A) and (B) of section 311(b)(2),
but only to the extent that those amounts would, if such
amounts were instead payable by virtue of the State law's
being deemed to be so modified pursuant to section 311(b)(1),
have been reimbursable under paragraph (1).
(b) Determination of Amount.--Sums under subsection (a)
payable to any State by reason of such State having an
agreement under this title shall be payable, either in
advance or by way of reimbursement (as may be determined by
the Secretary), in such amounts as the Secretary estimates
the State will be entitled to receive under this title for
each calendar month, reduced or increased, as the case may
be, by any amount by which the Secretary finds that the
Secretary's estimates for any prior calendar month were
greater or less than the amounts which should have been paid
to the State. Such estimates may be made on the basis of such
statistical, sampling, or other method as may be agreed upon
by the Secretary and the State agency of the State involved.
SEC. 513. FINANCING PROVISIONS.
(a) In General.--Funds in the extended unemployment
compensation account (as established by section 905(a) of the
Social Security Act (42 U.S.C. 1105(a))), and the Federal
unemployment account (as established by section 904(g) of
such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund
(as established by section 904(a) of such Act (42 U.S.C.
1104(a))) shall be used for the making of payments to States
having agreements entered into under this title.
(b) Certification.--The Secretary shall from time to time
certify to the Secretary of the Treasury for payment to each
State the sums which are payable to such State under this
title. The Secretary of the Treasury, prior to audit or
settlement by the General Accounting Office, shall make
payments to the State in accordance with such certification
by transfers from the extended unemployment compensation
account (as so established), or, to the extent that there are
insufficient funds in that account, from the Federal
unemployment account, to the account of such State in the
Unemployment Trust Fund (as so established).
(c) Assistance to States.--There are appropriated out of
the employment security administration account of the
Unemployment Trust Fund (as established by section 901(a) of
the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to
reimburse States for the costs of the administration of
agreements under this title (including any improvements in
technology in connection therewith) and to provide
reemployment services to unemployment compensation claimants
in States having agreements under this title. Each State's
share of the amount appropriated by the preceding sentence
shall be determined by the Secretary according to the factors
described in section 302(a) of the Social Security Act (42
U.S.C. 502(a)) and certified by the Secretary to the
Secretary of the Treasury.
(d) Appropriations for Certain Payments.--There are
appropriated from the general fund of the Treasury, without
fiscal year limitation, to the extended unemployment
compensation account (as so established) of the Unemployment
Trust Fund (as so established) such sums as the Secretary
estimates to be necessary to make the payments under this
section in respect of--
(1) compensation payable under chapter 85 of title 5,
United States Code; and
(2) compensation payable on the basis of services to which
section 3309(a)(1) of the Internal Revenue Code of 1986
applies.
Amounts appropriated pursuant to the preceding sentence shall
not be required to be repaid.
SEC. 514. DEFINITIONS.
For purposes of this title, the terms ``compensation'',
``base period'', ``regular compensation'', ``State'', ``State
agency'', ``State law'', and ``week'' have the respective
meanings given such terms under section 205 of the Federal-
State Extended Unemployment Compensation Act of 1970.
SEC. 515. APPLICABILITY.
(a) In General.--Except as provided in subsection (b), an
agreement entered into under this title shall apply to weeks
of unemployment--
(1) beginning after the date on which such agreement is
entered into; and
(2) ending before July 1, 2004.
(b) Phase-Out of TERUC.--
(1) In general.--Subject to paragraph (2), in the case of
an individual who has established eligibility for temporary
enhanced regular unemployment compensation, but who has not
exhausted all rights to such compensation, as of the last day
of the week ending before July 1, 2004, such compensation
shall continue to be payable to such individual for any week
beginning after such date for which the individual meets the
eligibility requirements of this title.
(2) Limitation.--No compensation shall be payable by reason
of paragraph (1) for any week beginning after December 31,
2004.
SEC. 516. COORDINATION WITH THE TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION ACT OF 2002.
(a) In General.--The Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended--
[[Page S6307]]
(1) in section 202(b)(1), by inserting ``, and who have
exhausted all rights to temporary enhanced regular
unemployment compensation'' before the semicolon at the end;
(2) in section 202(b)(2), by inserting ``, temporary
enhanced regular unemployment compensation,'' after ``regular
compensation'';
(3) in section 202(c), by inserting ``(or, as the case may
be, such individual's rights to temporary enhanced regular
unemployment compensation)'' after ``State law'' in the
matter preceding paragraph (1);
(4) in section 202(c)(1), by inserting ``and no payments of
temporary enhanced regular unemployment compensation can be
made'' after ``under such law'';
(5) in section 202(d)(1), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
(including dependents' allowances) payable to such individual
for such a week,'' after ``total unemployment'';
(6) in section 202(d)(2)(A), by inserting ``, or, as the
case may be, to temporary enhanced regular unemployment
compensation,'' after ``State law'';
(7) in section 203(b)(1)(A), by inserting ``plus the amount
of any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``under
such law''; and
(8) in section 203(b)(2), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``total
unemployment''.
(b) Amount of TEUC Offset by Amount of TERUC.--Section
203(b)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting a comma; and
(2) by adding at the end the following:
``minus the number of weeks in which the individual was
entitled to temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in section 511(b)(2)(A) of the Jobs
and Growth Reconciliation Tax Relief Act of 2003 (relating to
the alternative base period) multiplied by the individual's
average weekly benefit amount for the benefit year.''.
(c) Temporary Enhanced Regular Unemployment Compensation
Defined.--Section 207 of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended to read as follows:
``SEC. 207. DEFINITIONS.
``In this title:
``(1) General definitions.--The terms `compensation',
`regular compensation', `extended compensation', `additional
compensation', `benefit year', `base period', `State', `State
agency', `State law', and `week' have the respective meanings
given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note).
``(2) Temporary enhanced regular unemployment
compensation.--The term `temporary enhanced regular
unemployment compensation' means temporary enhanced regular
unemployment benefits payable under title V of the Jobs and
Growth Reconciliation Tax Relief Act of 2003.''.
Subtitle C--Railroad Unemployment Insurance
SEC. 517. TEMPORARY INCREASE IN EXTENDED UNEMPLOYMENT
BENEFITS UNDER THE RAILROAD UNEMPLOYMENT
INSURANCE ACT.
Section 2(c)(2) of the Railroad Unemployment Insurance Act
(45 U.S.C. 352(c)(2)) is amended by adding at the end the
following:
``(D) Temporary increase in extended unemployment
benefits.--
``(i) Employees with 10 or more years of service.--Subject
to clause (iii), in the case of an employee who has 10 or
more years of service (as so defined), with respect to
extended unemployment benefits--
``(I) subparagraph (A) shall be applied by substituting
``130 days of unemployment'' for ``65 days of unemployment'';
and
``(II) subparagraph (B) shall be applied by inserting
``(or, in the case of unemployment benefits, 13 consecutive
14-day periods'' after ``7 consecutive 14-day periods''.
``(ii) Employees with less than 10 years of service.--
Subject to clause (iii), in the case of an employee who has
less than 10 years of service (as so defined), with respect
to extended unemployment benefits, this paragraph shall apply
to such an employee in the same manner as this paragraph
would apply to an employee described in clause (i) if such
clause had not been enacted.
``(iii) Application.--The provisions of clauses (i) and
(ii) shall apply to--
``(I) an employee who received normal benefits for days of
unemployment under this Act during the period beginning on
July 1, 2002, and ending on November 30, 2003; and
``(II) days of unemployment beginning on or after the date
of enactment of Jobs and Growth Reconciliation Tax Relief Act
of 2003.''.
TITLE VI--OTHER PROVISIONS
Subtitle A--Provisions Designed To Curtail Tax Shelters
SEC. 601. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects) the taxpayer's economic position,
and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
In applying subclause (II), a purpose of achieving a
financial accounting benefit shall not be taken into account
in determining whether a transaction has a substantial nontax
purpose if the origin of such financial accounting benefit is
a reduction of income tax.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(D) Treatment of lessors.--A lessor of tangible property
subject to a lease shall be treated as satisfying the
requirements of paragraph (1)(B)(ii) with respect to the
leased property if such lease satisfies such requirements as
provided by the Secretary.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into on or after May 8,
2003.
SEC. 602. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
[[Page S6308]]
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 603. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements and noneconomic substance transaction
understatements.
``(2) Coordination with other penalties.--
[[Page S6309]]
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 604. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(n)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(n)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''.
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into on or after May 8,
2003.
[[Page S6310]]
SEC. 605. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY
FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''.
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 606. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 607. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''.
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 608. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the date the
return including the transaction is filed under section 6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 609. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
[[Page S6311]]
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 610. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority To Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct' means any action, or failure to take
action, subject to penalty under section 6700, 6701, 6707, or
6708.''.
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS.''.
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 611. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 612. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''.
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 613. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''.
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''.
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''.
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
[[Page S6312]]
(d) Treatment of Frivolous Applications for Offers-in-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, Etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''.
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 614. PENALTY ON PROMOTERS OF TAX SHELTERS.
(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''.
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 615. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(e)(1) (relating to
substantial omission of items for income taxes) is amended by
adding at the end the following new subparagraph:
``(C) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the tax for
such taxable year may be assessed, or a proceeding in court
for collection of such tax may be begun without assessment,
at any time within 6 years after the time the return is
filed. This subparagraph shall not apply to any taxable year
if the time for assessment or beginning the proceeding in
court has expired before the time a transaction is treated as
a listed transaction under section 6011.''.
(b) Effective Date.--The amendment made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 616. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable To Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
Subtitle B--Enron-Related Tax Shelter Provisions
SEC. 621. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.
(a) In General.--Section 362 (relating to basis to
corporations) is amended by adding at the end the following
new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired in
such transaction shall (notwithstanding subsections (a) and
(b)) be its fair market value immediately after such
transaction.
``(B) Property described.--For purposes of subparagraph
(A), property is described in this subparagraph if--
``(i) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(ii) gain or loss with respect to such property is
subject to such tax in the hands of the transferee
immediately after such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(C) Importation of net built-in loss.--For purposes of
subparagraph (A), there is an importation of a net built-in
loss in a transaction if the transferee's aggregate adjusted
bases of property described in subparagraph (B) which is
transferred in such transaction would (but for this
paragraph) exceed the fair market value of such property
immediately after such transaction.''.
``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred by a transferor in any
transaction which is described in subsection (a) and which is
not described in paragraph (1) of this subsection, and
``(ii) the transferee's aggregate adjusted bases of such
property so transferred would (but for this paragraph) exceed
the fair market value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred shall
not exceed the fair market value of such property immediately
after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall be
allocated among the property so transferred in proportion to
their respective built-in losses immediately before the
transaction.
``(C) Exception for transfers within affiliated group.--
Subparagraph (A) shall not apply to any transaction if the
transferor owns stock in the transferee meeting the
requirements of section 1504(a)(2). In the case of property
to which subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair market
value immediately after the transfer.''.
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) (relating to liquidation of subsidiary) is
amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(1)(B)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions after February 13, 2003.
SEC. 622. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK
HELD BY PARTNERSHIP IN CORPORATE PARTNER.
(a) In General.--Section 755 is amended by adding at the
end the following new subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any
decrease in the adjusted basis of partnership property under
section 734(b)--
``(1) no allocation may be made to stock in a corporation
(or any person which is related (within the meaning of
section 267(b) or 707(b)(1)) to such corporation) which is a
partner in the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to
other partnership property.
Gain shall be recognized to the partnership to the extent
that the amount required to be allocated under paragraph (2)
to other partnership property exceeds the aggregate adjusted
basis of such other property immediately before the
allocation required by paragraph (2).''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions after February 13, 2003.
SEC. 623. REPEAL OF SPECIAL RULES FOR FASITS.
(a) In General.--Part V of subchapter M of chapter 1
(relating to financial asset securitization investment
trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) is amended by striking
``REMIC, or FASIT'' and inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) is amended by
striking ``a REMIC to which part IV of subchapter M applies,
or a FASIT to which part V of subchapter M applies,'' and
inserting ``or a REMIC to which part IV of subchapter M
applies,''.
(3) Paragraph (1) of section 582(c) is amended by striking
``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) is amended by
striking the last sentence.
(5) Paragraph (5) of section 860G(a) is amended by adding
``and'' at the end of subparagraph (B), by striking ``, and''
at the end
[[Page S6313]]
of subparagraph (C) and inserting a period, and by striking
subparagraph (D).
(6) Subparagraph (C) of section 1202(e)(4) is amended by
striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
(7) Subparagraph (C) of section 7701(a)(19) is amended by
adding ``and'' at the end of clause (ix), by striking ``,
and'' at the end of clause (x) and inserting a period, and by
striking clause (xi).
(8) The table of parts for subchapter M of chapter 1 is
amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on February
14, 2003.
(2) Exception for existing fasits.--
(A) In general.--Paragraph (1) shall not apply to any FASIT
in existence on the date of the enactment of this Act to the
extent that regular interests issued by the FASIT before such
date continue to remain outstanding in accordance with the
original terms of issuance.
(B) Transfer of additional assets not permitted.--Except as
provided in regulations prescribed by the Secretary of the
Treasury or the Secretary's delegate, subparagraph (A) shall
cease to apply as of the earliest date after the date of the
enactment of this Act that any property is transferred to the
FASIT.
SEC. 624. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.
(a) In General.--Paragraph (2) of section 163(l) is amended
by striking ``or a related party'' and inserting ``or equity
held by the issuer (or any related party) in any other
person''.
(b) Exception for Certain Instruments Issued By Dealers In
Securities.--Section 163(l) is amended by redesignating
paragraphs (4) and (5) as paragraphs (5) and (6) and by
inserting after paragraph (3) the following new paragraph:
``(4) Exception for certain instruments issued by dealers
in securities.--For purposes of this subsection, the term
`disqualified debt instrument' does not include indebtedness
issued by a dealer in securities (or a related party) which
is payable in, or by reference to, equity (other than equity
of the issuer or a related party) held by such dealer in its
capacity as a dealer in securities. For purposes of this
paragraph, the term `dealer in securities' has the meaning
given such term by section 475.''.
(c) Conforming Amendment.--Paragraph (3) of section 163(l)
is amended by striking ``or a related party'' in the material
preceding subparagraph (A) and inserting ``or any other
person''.
(d) Effective Date.--The amendments made by this section
shall apply to debt instruments issued after February 13,
2003.
SEC. 625. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER
SECTION 269.
(a) In General.--Subsection (a) of section 269 (relating to
acquisitions made to evade or avoid income tax) is amended to
read as follows:
``(a) In General.--If--
``(1)(A) any person acquires stock in a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such
property, in the hands of the acquiring corporation, is
determined by reference to the basis in the hands of the
transferor corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax by
securing the benefit of a deduction, credit, or other
allowance,
then the Secretary may disallow such deduction, credit, or
other allowance.''.
(b) Effective Date.--The amendment made by this section
shall apply to stock and property acquired after February 13,
2003.
SEC. 626. MODIFICATIONS OF CERTAIN RULES RELATING TO
CONTROLLED FOREIGN CORPORATIONS.
(a) Limitation on Exception From PFIC Rules for United
States Shareholders of Controlled Foreign Corporations.--
Paragraph (2) of section 1297(e) (relating to passive
investment company) is amended by adding at the end the
following flush sentence:
``Such term shall not include any period if there is only a
remote likelihood of an inclusion in gross income under
section 951(a)(1)(A)(i) of subpart F income of such
corporation for such period.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years on controlled foreign
corporation beginning after February 13, 2003, and to taxable
years of United States shareholder in which or with which
such taxable years of controlled foreign corporations end.
Subtitle C--Provisions to Discourage Corporate Expatriation
SEC. 631. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.
(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.
``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.
Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base In Certain
Inversion Transactions To Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',
then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).
For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
[[Page S6314]]
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any income or gain required to be
recognized under section 304, 311(b), 367, 1001, or 1248, or
under any other provision of chapter 1, by reason of the
transfer during the applicable period of stock or other
properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.
The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and such deficiency may
be assessed before the expiration of such 3-year period
notwithstanding the provisions of any other law or rule of
law which would otherwise prevent such assessment.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not filed in good faith or does not
substantially comply with such requirements.
If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.
``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--
``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is under such common control with any member
of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.
``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations
[[Page S6315]]
providing for such adjustments to the application of this
section as are necessary to prevent the avoidance of the
purposes of this section, including the avoidance of such
purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved in
transactions to which section 7874 of such Code (as added by
subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:
``Sec. 7874. Rules relating to inverted corporate entities.''.
(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.
SEC. 632. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.
(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:
``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS
``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.
``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.
``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only If Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.
``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).
Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or
[[Page S6316]]
to any specified stock compensation (as defined in section
5000A) on which tax is imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:
``Chapter 48. Stock compensation of insiders in inverted
corporations.''.
(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and (e)(1) of section 5000A of
the Internal Revenue Code of 1986, as added by this section.
SEC. 633. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.
(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.
Subtitle D--Imposition of Customs User Fees
SEC. 641. CUSTOMS USER FEES.
Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended
by striking ``September 30, 2003'' and inserting ``September
30, 2013''.
TITLE VII--SUNSET
SEC. 701. SUNSET.
(a) In General.--Except as otherwise provided, the
provisions of, and amendments made, by this Act shall not
apply to taxable years beginning after December 31, 2012, and
the Internal Revenue Code of 1986 shall be applied and
administered to such years as if such amendments had never
been enacted.
(b) Exceptions.--Subsection (a) shall not apply to the
following provisions of, and amendments made, by this Act:
(1) Title III.
(2) Title VI.
______
SA 580. Ms. LANDRIEU submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V add the
following:
SEC. ____. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR
EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF
CERTAIN OTHER RENEWAL COMMUNITIES.
(a) In General.--Section 1400H(b)(2) (relating to
modification) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) subsection (d)(1)(B) thereof shall be applied by
substituting `such renewal community, an adjacent renewal
community within the same State as such renewal community, or
a renewal community within such State which is within 5 miles
of any border of such renewal community' for `such
empowerment zone'.''.
(b) Reduction of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar year 2003, 35.1% shall be substituted for such year.
(c) Effective Dates.--
(1) The amendments made by subsection (a) shall take effect
as if included in the amendment made by section 101(a) of the
Community Renewal Tax Relief Act of 2000.
(2) Subsection (b) shall take effect on the date of
enactment of this Act.
______
SA 581. Ms. LANDRIEU submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED
TO GENERAL BUSINESS CREDIT.
(a) Ready Reserve-National Guard Credit.--Subpart D of part
IV of subchapter A of chapter 1 (relating to business-related
credits) is amended by adding at the end the following:
``SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.
``(a) General Rule.--For purposes of section 38, the Ready
Reserve-National Guard employee credit determined under this
section for any taxable year is an amount equal to 50 percent
of the actual compensation amount for such taxable year.
``(b) Definition of Actual Compensation Amount.--For
purposes of this section, the term `actual compensation
amount' means the amount of compensation paid or incurred by
an employer with respect to a Ready Reserve-National Guard
employee on any day during a taxable year when the employee
was absent from employment for the purpose of performing
qualified active duty.
``(c) Limitations.--
``(1) Maximum period for credit per employee.--The maximum
period with respect to which the credit may be allowed with
respect to any Ready Reserve-National Guard employee shall
not exceed the 12-month period beginning on the first day
such credit is so allowed with respect to such employee.
``(2) Days other than work days.--No credit shall be
allowed with respect to a Ready Reserve-National Guard
employee who performs qualified active duty on any day on
which the employee was not scheduled to work (for reason
other than to participate in qualified active duty).
``(d) Definitions.--For purposes of this section--
``(1) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty, other than the training duty specified
in section 10147 of title 10, United States Code (relating to
training requirements for the Ready Reserve), or section
502(a) of title 32, United States Code (relating to required
drills and field exercises for the National Guard), in
connection with which an employee is entitled to reemployment
rights and other benefits or to a leave of absence from
employment under chapter 43 of title 38, United States Code,
and
``(B) hospitalization incident to such duty.
``(2) Compensation.--The term `compensation' means any
remuneration for employment, whether in cash or in kind,
which is paid or incurred by a taxpayer and which is
deductible from the taxpayer's gross income under section
162(a)(1).
``(3) Ready reserve-national guard employee.--The term
`Ready Reserve-National Guard employee' means an employee who
is a member of the Ready Reserve or of the National Guard.
``(4) National guard.--The term `National Guard' has the
meaning given such term by section 101(c)(1) of title 10,
United States Code.
``(5) Ready reserve.--The term `Ready Reserve' has the
meaning given such term by section 10142 of title 10, United
States Code.''.
(b) Credit To Be Part of General Business Credit.--
Subsection (b) of section 38 (relating to general business
credit) is amended by striking ``plus'' at the end of
paragraph (14), by striking the period at the end of
paragraph (15) and inserting ``, plus'', and by adding at the
end the following:
``(16) the Ready Reserve-National Guard employee credit
determined under section 45G(a).''.
(c) Conforming Amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 45F the
following:
``Sec. 45G. Ready Reserve-National Guard employee credit.''.
(d) Revision of Partial Exclusion of Dividends Received By
Individuals.--Section 116(a)(2)(B) of the Internal Revenue
Code of 1986, as added by section 201, is amended by striking
``2007'' and inserting ``2008''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
______
SA 582. Ms. LANDRIEU submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
Strike section 371 and insert the following:
SEC. 371. TEMPORARY INCREASE OF MEDICAID FMAP.
(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
section for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
Fiscal Year 2004.--Notwithstanding any other provision of
law, but subject to subsection (e), if the FMAP determined
without regard to this section for a State for fiscal year
2004 is less than the FMAP as so determined for fiscal year
2003, the FMAP for the State for fiscal year 2003 shall be
substituted for the State's FMAP for each calendar quarter of
fiscal year 2004, before the application of this section.
(c) General 2.45 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and Fiscal Year 2004.--
Notwithstanding any other provision of law, but subject to
subsections (e) and (f), for each State for the third and
fourth calendar quarters of fiscal year 2003 and each
calendar quarter of fiscal year 2004, the FMAP (taking into
account the application of subsections (a) and (b)) shall be
increased by 2.45 percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and each calendar quarter of
fiscal year 2004, the amounts otherwise determined for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands,
and American
[[Page S6317]]
Samoa under subsections (f) and (g) of section 1108 of the
Social Security Act (42 U.S.C. 1308) shall each be increased
by an amount equal to 4.90 percent of such amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4); or
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.).
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, but prior to the date of
enactment of this Act is eligible for an increase in its FMAP
under subsection (c) or an increase in a cap amount under
subsection (d) in the first calendar quarter (and subsequent
calendar quarters) in which the State has reinstated
eligibility that is no more restrictive than the eligibility
under such plan (or waiver) as in effect on September 2,
2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of October 1, 2004, this section
is repealed.
SEC. 371A. ONE-TIME REVENUE GRANT TO STATES AND LOCAL
GOVERNMENTS.
(a) Appropriation.--There is authorized to be appropriated
and is appropriated to carry out this section $30,000,000,000
for fiscal year 2003.
(b) Payments to States.--
(1) In general.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, pay with respect to a State, the sum
of the amounts determined for the State under paragraphs (2),
(3), and (4).
(2) Funding to meet the requirements of the no child left
behind act.--$7,500,000,000 shall be paid to States in the
same manner as allocations are made with respect to States
under section 1122 of the Elementary and Secondary Education
Act of 1965 (20 U.S.C. 6332).
(3) Funding for child care for low-income families.--
$3,000,000,000 shall be paid to States in the same manner as
allocations are made with respect to States under section
658O of the Child Care and Development Block Grant Act of
1990 (42 U.S.C. 9858m).
(4) Funding for other state priorities.--
(A) 50 percent based on population.--$4,875,000,000 shall
be allotted among such States on the basis of the relative
population of each such State, as determined by the Secretary
on the basis of the most recent satisfactory data.
(B) 50 percent based on change in unemployment rate.--
(i) Tier 1.--$1,220,000,000 shall be allotted among such
States which have experienced a tier 1 unemployment rate on
the basis of the relative number of unemployed individuals
for calendar year 2002 in each such State, as determined by
the Secretary on the basis of the most recent satisfactory
data.
(ii) Tier 2.--$3,655,000,000 shall be allotted among such
States which have experienced a tier 2 unemployment rate on
the basis of the relative number of unemployed individuals
for calendar year 2002 in each such State, as determined by
the Secretary on the basis of the most recent satisfactory
data.
(C) Guidelines for Use of Funds.--It is the sense of
Congress that States should use funds paid under this
paragraph for homeland security, public health, highway
construction, and the prevention of additional property and
other tax increases.
(c) Payments to Units of General Local Government.--
(1) In general.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, pay with respect to a unit of general
local government, the sum of the amounts determined for the
unit of general local government under paragraphs (2) and
(3).
(2) percent based on population.--$4,875,000,000 shall be
allotted among such States as determined under subsection
(b)(4)(A) for distribution to the various units of general
local government within such States on the basis of the
relative population of each such unit within each such State,
as determined by the Secretary on the basis of the most
recent satisfactory data.
(3) 50 percent based on change in unemployment rate.--
(A) Tier 1.--$1,220,000,000 shall be allotted among such
States which have experienced a tier 1 unemployment rate as
determined under subsection (b)(4)(B)(i) for distribution to
the various units of general local government within such
States on the basis of the relative number of unemployed
individuals for calendar year 2002 in each such unit within
each such State, as determined by the Secretary on the basis
of the most recent satisfactory data.
(B) Tier 2.--$3,655,000,000 shall be allotted among such
States which have experienced a tier 2 unemployment rate as
determined under subsection (b)(4)(B)(ii) for distribution to
the various units of general local government within such
States on the basis of the relative number of unemployed
individuals for calendar year 2002 in each such unit within
each such State, as determined by the Secretary on the basis
of the most recent satisfactory data.
(4) Guidelines for Use of Funds.--It is the sense of
Congress that units of general local government should use
funds paid in accordance with this subsection for homeland
security, public health, highway construction, and the
prevention of additional property and other tax increases.
(d) Definitions.--For purposes of this section--
(1) State.--The term ``State'' means any of the several
States, the District of Columbia, and the Commonwealth of
Puerto Rico.
(2) Unit of general local government.--
(A) In general.--The term ``unit of general local
government'' means--
(i) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(ii) the District of Columbia, the Commonwealth of Puerto
Rico, and the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(B) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
section, the rules under section 6720(c) of title 31, United
States Code, shall apply.
(3) Unemployment.--With respect to any State or unit of
general local government--
(A) Tier 1 unemployment rate.--The term ``tier 1
unemployment rate'' means an unemployment rate for calendar
year 2002 which was at least .4 but not more than 1.0
percentage point greater than such rate for calendar year
2000.
(B) Tier 2 unemployment rate.--The term ``tier 2
unemployment rate'' means an unemployment rate for calendar
year 2002 which was more than 1.0 percentage point greater
than such rate for calendar year 2000.
SEC. 371B. ELIMINATION OF 20 PERCENT PARTIAL EXCLUSION OF
DIVIDENDS RECEIVED BY INDIVIDUALS.
(a) In General.--Section 116(a)(2)(B), as added by section
201 of this Act, is amended by striking ``(20 percent in the
case of taxable years beginning after 2007)''.
(b) Conforming Amendments.--Sections 531(a) and 541(a), as
amended by section 201 of this Act, are each amended by
striking ``(80 percent in the case of taxable years beginning
after 2007)''.
______
SA 583. Mr. BINGAMAN submitted an amendment intended to be proposed
by him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. INFLATION ADJUSTMENT FOR ELDERLY AND DISABLED
CREDIT DOLLAR AMOUNTS.
(a) In General.--Section 22 (relating to credit for the
elderly and the permanently disabled) is amended by adding at
the end the following new subsection:
``(g) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year
beginning after 2002, each of the dollar amounts contained in
subsections (c) and (d) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, by substituting
`1983' for `1992' in subparagraph (B) thereof.
``(B) Rounding.--If any increase determined under
subparagraph (A) is not a multiple of $50, such increase
shall be rounded to the nearest multiple of $50.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
On page 19, line 12, strike ``in the case of taxable years
beginning after 2007'' and insert ``in the case of qualified
dividend income received after June 30, 2008''.
______
SA 584. Mr. BINGAMAN (for himself and Mrs. Lincoln) submitted an
amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201
[[Page S6318]]
of the concurrent resolution on the budget for fiscal year 2004; which
was ordered to lie on the table; as follows:
On page ____, between lines ____ and ____, insert the
following:
SEC. ____. MEDICAID DSH ALLOTMENTS.
(a) Temporary Increase in Floor for Treatment as an
Extremely Low DSH State under the Medicaid Program.--
(1) In general.--Section 1923(f)(5) of the Social Security
Act (42 U.S.C. 1396r-4(f)(5)) is amended--
(A) by striking ``In the case of'' and inserting the
following:
``(A) In general.--In the case of''; and
(B) by adding at the end the following:
``(B) Temporary increase in floor for fiscal year 2004.--
During the period that begins on October 1, 2003, and ends on
September 30, 2004, subparagraph (A) shall be applied--
``(i) by substituting `fiscal year 2002' for `fiscal year
1999';
``(iii) by substituting `Centers for Medicare & Medicaid
Services' for `Health Care Financing Administration';
``(ii) by substituting `August 31, 2003' for `August 31,
2000';
``(iv) by substituting `3 percent' for `1 percent' each
place it appears;
``(v) by substituting `fiscal year 2004' for `fiscal year
2001'; and
``(vi) without regard to the second sentence.''.
(2) Effective date.--The amendments made by paragraph (1)
take effect on October 1, 2003, and apply to DSH allotments
under title XIX of the Social Security Act only with respect
to fiscal year 2004.
(b) Continuation of BIPA Rule for Determination of
Allotments for Fiscal Year 2003.--
(1) In general.--Section 1923(f)(4) of the Social Security
Act (42 U.S.C. 1396r-4(f)(4)) is amended--
(A) in the paragraph heading, by striking ``and 2002'' and
inserting ``through 2003'';
(B) in subparagraph (A)--
(i) in clause (i), by striking ``and'' at the end;
(ii) in clause (ii), by striking the period and inserting a
semicolon; and
(iii) by adding at the end the following:
``(iii) fiscal year 2003, shall be the DSH allotment
determined under clause (ii) increased, subject to
subparagraph (B) and paragraph (5), by the percentage change
in the Consumer Price Index for all urban consumers (all
items; U.S. city average) for fiscal year 2002.''; and
(C) in subparagraph (C)--
(i) in the subparagraph heading, by striking ``2002'' and
inserting ``2003''; and
(ii) by striking ``2003'' and inserting ``2004''.
(3) Conforming amendments.--Section 1923(f)(3) of such Act
(42 U.S.C. 1396r-4(f)(3)) is amended--
(A) in the paragraph heading, by striking ``2003'' and
inserting ``2004''; and
(B) by striking subparagraph (A) and inserting the
following:
``(A) In general.--The DSH allotment for any State--
``(i) for fiscal year 2004, is equal to the DSH allotment
determined for the State for fiscal year 2002 under the table
set forth in paragraph (2), increased, subject to
subparagraph (B) and paragraph (5), by the percentage change
in the Consumer Price Index for all urban consumers (all
items; U.S. city average), for each of fiscal years 2002 and
2003; and
``(ii) for fiscal year 2005 and each succeeding fiscal
year, is equal to the DSH allotment determined for the State
for the preceding fiscal year under this paragraph,
increased, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average), for the
previous fiscal year.''.
(4) Effective date.--The amendments made by this subsection
shall take effect as if included in the enactment of section
701 of the Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106-554 (114 Stat. 2763A-569).
(c) Allotment Adjustment for Certain States.--
(1) In general.--Section 1923(f) of the Social Security Act
(42 U.S.C. 1396r-4(f)) is amended--
(A) by redesignating paragraph (6) as paragraph (7); and
(B) by inserting after paragraph (5) the following:
``(6) Allotment adjustment for certain states.--
``(A) Tennessee.--If the State-wide waiver approved under
section 1115 for the State of Tennessee with respect to the
requirements of this title (as in effect on the date of
enactment of this subsection) is revoked or terminated, the
Secretary shall--
``(i) permit the State of Tennessee to submit an amendment
to its State plan that would describe the methodology to be
used by the State (after the effective date of such
revocation or termination) to identify and make payments to
disproportionate share hospitals, including children's
hospitals and institutions for mental diseases or other
mental health facilities (other than State-owned institutions
or facilities), on the basis of the proportion of patients
served by such hospitals that are low-income patients with
special needs; and
``(ii) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the State
that provides for the maximum amount (permitted consistent
with paragraph (3)(B)(ii)) that does not result in greater
expenditures under this title than would have been made if
such waiver had not been revoked or terminated.
``(B) Hawaii.--Effective for DSH allotments beginning with
fiscal year 2003, the Secretary shall compute a DSH allotment
for the State of Hawaii in the same manner as DSH allotments
are determined with respect to those States to which
paragraph (5) applies (but without regard to the requirement
under such paragraph that total expenditures under the State
plan for disproportionate share hospital adjustments for any
fiscal year exceeds 0).''.
(2) Treatment of institutions for mental diseases.--Section
1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-
4(h)(1)) is amended--
(A) in paragraph (1), in the matter preceding subparagraph
(A), by inserting ``(subject to paragraph (3))'' after ``the
lesser of the following''; and
(B) by adding at the end the following new paragraph:
``(3) Special rule.--The limitation of paragraph (1) shall
not apply in the case of Tennessee in the case of a
revocation or termination of its statewide waiver described
in subsection (f)(6)(A).''.
(3) Effective date.--The amendment made by this subsection
shall take effect as if enacted on October 1, 2002.
(d) Funding.--Of the amount appropriated in section 371(e)
for fiscal year 2003 (after the application of section
1903(x) of the Social Security Act), an amount equal to the
amount required to carry out the amendments made by this
section for each of fiscal years 2003 through 2013 shall be
transferred and made available from the amount so
appropriated in section 371(e) (after such application) to
the Secretary of Health and Human Services to carry out the
amendments made by this section.
______
SA 585. Mr. NELSON of Florida submitted an amendment intended to be
proposed by him to the bill S. 1054, to provide for reconciliation
pursuant to section 201 of the concurrent resolution on the budget for
fiscal year 2004; which was ordered to lie on the table; as follows:
On page 19, line 13, strike ``2007'' and insert ``2011''.
On page 26, line 19, strike ``2007'' and insert ``2011''.
On page 26, line 22, strike ``2007'' and insert ``2011''.
On page 281, strike lines 3 and 4 and insert the following:
TITLE VI--MISCELLANEOUS
SEC. 601. REPEAL OF REQUIREMENT OF REDUCTION OF SBP SURVIVOR
ANNUITIES BY DEPENDENCY AND INDEMNITY
COMPENSATION.
(a) Repeal.--Section 1451(c) of title 10, United States
Code, is amended by striking paragraph (2).
(b) Prohibition on Retroactive Benefits.--No benefits may
be paid to any person for any period before the effective
date specified in subsection (c) by reason of the amendment
made by subsection (a).
(c) Effective Date.--The amendment made by subsection (a)
shall take effect on--
(1) the first day of the first month that begins after the
date of the enactment of this Act; or
(2) the first day of the fiscal year that begins in the
calendar year in which this Act is enacted, if later than the
date specified in paragraph (1).
SEC. 602. COMPUTATION OF BENEFITS UNDER SURVIVOR BENEFIT PLAN
FOR SURVIVING SPOUSES OVER AGE 62.
(a) Phased Increase in Basic Annuity.--
(1) Standard annuity.--
(A) Increase to 55 percent.--Clause (i) of subsection
(a)(1)(B) of section 1451 of title 10, United States Code, is
amended by striking ``35 percent of the base amount.'' and
inserting ``the product of the base amount and the percent
applicable to the month, as follows:
``(I) For a month before October 2004, the applicable
percent is 35 percent.
``(II) For a month during fiscal year 2005, the applicable
percent is 40 percent.
``(III) For a month during fiscal year 2006, the applicable
percent is 45 percent.
``(IV) For a month during fiscal year 2007, the applicable
percent is 50 percent.
``(V) For a month during a fiscal year after fiscal year
2007, the applicable percent is 55 percent.''.
(B) Coordination with savings provision under prior law.--
Clause (ii) of such subsection is amended by striking ``, at
the time the beneficiary becomes entitled to the annuity,''.
(2) Reserve-component annuity.--Subsection (a)(2)(B)(i)(I)
of such section is amended by striking ``35 percent'' and
inserting ``the percent specified under subsection
(a)(1)(B)(i) as being applicable for the month''.
(3) Survivors of eligible persons dying on active duty,
etc.--
(A) Increase to 55 percent.--Clause (i) of subsection
(c)(1)(B) of such section is amended--
(i) by striking ``35 percent'' and inserting ``the
applicable percent''; and
(ii) by adding at the end the following: ``The percent
applicable for a month under the preceding sentence is the
percent specified under subsection (a)(1)(B)(i) as being
applicable for that month.''.
[[Page S6319]]
(B) Coordination with savings provision under prior law.--
Clause (ii) of such subsection is amended by striking ``, at
the time the beneficiary becomes entitled to the annuity,''.
(4) Clerical amendment.--The heading for subsection
(d)(2)(A) of such section is amended to read as follows:
``Computation of annuity.--''.
(b) Corresponding Phased Elimination of Supplemental
Annuity.--
(1) Phased reduction of supplemental annuity.--Section
1457(b) of title 10, United States Code, is amended--
(A) by striking ``5, 10, 15, or 20 percent'' and inserting
``the applicable percent''; and
(B) by inserting after the first sentence the following:
``The percent used for the computation shall be an even
multiple of 5 percent and, whatever the percent specified in
the election, may not exceed 20 percent for months before
October 2004, 15 percent for months during fiscal year 2005,
10 percent for months during fiscal year 2006, and 5 percent
for months after September 2006.''.
(2) Repeal upon implementation of 55 percent sbp annuity.--
Effective on October 1, 2007, chapter 73 of such title is
amended--
(A) by striking subchapter III; and
(B) by striking the item relating to subchapter III in the
table of subchapters at the beginning of that chapter.
(c) Recomputation of Annuities.--
(1) Periodic recomputation required.--Effective on the
first day of each month specified in paragraph (2)--
(A) each annuity under section 1450 of title 10, United
States Code, that commenced before that month, is computed
under a provision of section 1451 of that title amended by
subsection (a), and is payable for that month shall be
recomputed so as to be equal to the amount that would be in
effect if the percent applicable for that month under that
provision, as so amended, had been used for the initial
computation of the annuity; and
(B) each supplemental survivor annuity under section 1457
of such title that commenced before that month and is payable
for that month shall be recomputed so as to be equal to the
amount that would be in effect if the percent applicable for
that month under that section, as amended by this section,
had been used for the initial computation of the supplemental
survivor annuity.
(2) Time for recomputation.--The requirement under
paragraph (1) for recomputation of certain annuities applies
with respect to the following months:
(A) October 2004.
(B) October 2005.
(C) October 2006.
(D) October 2007.
(d) Recomputation of Retired Pay Reductions for
Supplemental Survivor Annuities.--The Secretary of Defense
shall take such actions as are necessitated by the amendments
made by subsection (b) and the requirements of subsection
(c)(1)(B) to ensure that the reductions in retired pay under
section 1460 of title 10, United States Code, are adjusted to
achieve the objectives set forth in subsection (b) of that
section.
SEC. 603. OPEN ENROLLMENT PERIOD FOR SURVIVOR BENEFIT PLAN
COMMENCING OCTOBER 1, 2004.
(a) Persons Not Currently Participating in Survivor Benefit
Plan.--
(1) Election of sbp coverage.--An eligible retired or
former member may elect to participate in the Survivor
Benefit Plan under subchapter II of chapter 73 of title 10,
United States Code, during the open enrollment period
specified in subsection (f).
(2) Election of supplemental annuity coverage.--An eligible
retired or former member who elects under paragraph (1) to
participate in the Survivor Benefit Plan at the maximum level
may also elect during the open enrollment period to
participate in the Supplemental Survivor Benefit Plan
established under subchapter III of chapter 73 of title 10,
United States Code.
(3) Eligible retired or former member.--For purposes of
paragraphs (1) and (2), an eligible retired or former member
is a member or former member of the uniformed services who on
the day before the first day of the open enrollment period is
not a participant in the Survivor Benefit Plan and--
(A) is entitled to retired pay; or
(B) would be entitled to retired pay under chapter 1223 of
title 10, United States Code, but for the fact that such
member or former member is under 60 years of age.
(4) Status under sbp of persons making elections.--
(A) Standard annuity.--A person making an election under
paragraph (1) by reason of eligibility under paragraph (3)(A)
shall be treated for all purposes as providing a standard
annuity under the Survivor Benefit Plan.
(B) Reserve-component annuity.--A person making an election
under paragraph (1) by reason of eligibility under paragraph
(3)(B) shall be treated for all purposes as providing a
reserve-component annuity under the Survivor Benefit Plan.
(b) Election To Increase Coverage Under SBP.--A person who
on the day before the first day of the open enrollment period
is a participant in the Survivor Benefit Plan but is not
participating at the maximum base amount or is providing
coverage under the Plan for a dependent child and not for the
person's spouse or former spouse may, during the open
enrollment period, elect to--
(1) participate in the Plan at a higher base amount (not in
excess of the participant's retired pay); or
(2) provide annuity coverage under the Plan for the
person's spouse or former spouse at a base amount not less
than the base amount provided for the dependent child.
(c) Election for Current SBP Participants To Participate in
Supplemental SBP.--
(1) Election.--A person who is eligible to make an election
under this paragraph may elect during the open enrollment
period to participate in the Supplemental Survivor Benefit
Plan established under subchapter III of chapter 73 of title
10, United States Code, as added by section 1404.
(2) Persons eligible.--Except as provided in paragraph (3),
a person is eligible to make an election under paragraph (1)
if on the day before the first day of the open enrollment
period the person is a participant in the Survivor Benefit
Plan at the maximum level, or during the open enrollment
period the person increases the level of such participation
to the maximum level under subsection (b) of this section,
and under that Plan is providing annuity coverage for the
person's spouse or a former spouse.
(3) Limitation on eligibility for certain sbp participants
not affected by two-tier annuity computation.--A person is
not eligible to make an election under paragraph (1) if (as
determined by the Secretary concerned) the annuity of a
spouse or former spouse beneficiary of that person under the
Survivor Benefit Plan will be computed under section 1451(e)
of title 10, United States Code. However, such a person may
during the open enrollment period waive the right to have
that annuity computed under such section. Any such election
is irrevocable. A person making such a waiver may make an
election under paragraph (1) as in the case of any other
participant in the Survivor Benefit Plan.
(d) Manner of Making Elections.--An election under this
section must be made in writing, signed by the person making
the election, and received by the Secretary concerned before
the end of the open enrollment period. Any such election
shall be made subject to the same conditions, and with the
same opportunities for designation of beneficiaries and
specification of base amount, that apply under the Survivor
Benefit Plan or the Supplemental Survivor Benefit Plan, as
the case may be. A person making an election under subsection
(a) to provide a reserve-component annuity shall make a
designation described in section 1448(e) of title 10, United
States Code.
(e) Effective Date for Elections.--Any such election shall
be effective as of the first day of the first calendar month
following the month in which the election is received by the
Secretary concerned.
(f) Open Enrollment Period Defined.--The open enrollment
period is the one-year period beginning on October 1, 2004.
(g) Effect of Death of Person Making Election Within Two
Years of Making Election.--If a person making an election
under this section dies before the end of the two-year period
beginning on the effective date of the election, the election
is void and the amount of any reduction in retired pay of the
person that is attributable to the election shall be paid in
a lump sum to the person who would have been the deceased
person's beneficiary under the voided election if the
deceased person had died after the end of such two-year
period.
(h) Applicability of Certain Provisions of Law.--The
provisions of sections 1449, 1453, and 1454 of title 10,
United States Code, are applicable to a person making an
election, and to an election, under this section in the same
manner as if the election were made under the Survivor
Benefit Plan or the Supplemental Survivor Benefit Plan, as
the case may be.
(i) Additional Premium.--The Secretary of Defense may
require that the premium for a person making an election
under subsection (a)(1) or (b) include, in addition to the
amount required under section 1452(a) of title 10, United
States Code, an amount determined under regulations
prescribed by the Secretary of Defense for the purposes of
this subsection. Any such amount shall be stated as a
percentage of the base amount of the person making the
election and shall reflect the number of years that have
elapsed since the person retired, but may not exceed 4.5
percent of that person's base amount.
(j) Report Concerning Open Season.--Not later than July 1,
2004, the Secretary of Defense shall submit to the Committees
on Armed Services of the Senate and House of Representatives
a report on the open season authorized by this section for
the Survivor Benefit Plan. The report shall include the
following:
(1) A description of the Secretary's plans for
implementation of the open season.
(2) The Secretary's estimates of the costs associated with
the open season, including any anticipated effect of the open
season on the actuarial status of the Department of Defense
Military Retirement Fund.
(3) Any recommendation by the Secretary for further
legislative action.
TITLE VII--SUNSET
SEC. 701. SUNSET.
On page 281, after line 15, add the following:
(3) Title VI.
______
SA 586. Mr. BROWNBACK submitted an amendment intended to be proposed
by him to the bill S. 1054, to provide for reconciliation to section
201 of the concurrent resolution on the budget for fiscal year 2004;
which was ordered to lie on the table; as follows:
[[Page S6320]]
Strike section 107 and insert the following:
SEC. 107. INCREASE AND EXTENSION OF BONUS DEPRECIATION.
(a) In General.--Section 168(k) (relating to special
allowance for certain property acquired after September 10,
2001, and before September 11, 2004) is amended by adding at
the end the following new paragraph:
``(4) 50-percent bonus depreciation for certain property.--
``(A) In general.--In the case of 50-percent bonus
depreciation property--
``(i) paragraph (1)(A) shall be applied by substituting `50
percent' for `30 percent', and
``(ii) except as provided in paragraph (2)(C), such
property shall be treated as qualified property for purposes
of this subsection.
``(B) 50-percent bonus depreciation property.--For purposes
of this subsection, the term `50-percent bonus depreciation
property' means property described in paragraph (2)(A)(i)--
``(i) the original use of which commences with the taxpayer
after May 5, 2003,
``(ii) which is acquired by the taxpayer after May 5, 2003,
and before January 1, 2006, but only if no written binding
contract for the acquisition was in effect before May 6,
2003, and
``(iii) which is placed in service by the taxpayer before
January 1, 2006, or, in the case of property described in
paragraph (2)(B) (as modified by subparagraph (C) of this
paragraph), before January 1, 2007.
``(C) Special rules.--Rules similar to the rules of
subparagraphs (B) and (D) of paragraph (2) shall apply for
purposes of this paragraph; except that--
``(i) references to September 10, 2001, shall be treated as
references to May 5, 2003, and
``(ii) references to September 11, 2001, shall be treated
as references to May 6, 2003.
``(D) Automobiles.--Paragraph (2)(E) shall be applied by
substituting `$9,200' for `$4,600' in the case of 50-percent
bonus depreciation property.
``(E) Election of 30 percent bonus.--If a taxpayer makes an
election under this subparagraph with respect to any class of
property for any taxable year, subparagraph (A)(i) shall not
apply to all property in such class placed in service during
such taxable year.''
(b) Extension of Placed in Service Dates, Etc. for 30-
Percent Bonus Depreciation Property.--
(1) In general.--Clause (iv) of section 168(k)(2)(A) is
amended--
(A) by striking ``January 1, 2005'' and inserting ``January
1, 2006'', and
(B) by striking ``January 1, 2006'' (as in effect before
the amendment made by subparagraph (A)) and inserting
``January 1, 2007''.
(2) Portion of basis taken into account.--Subparagraphs
(B)(ii) and (D)(i) of section 168(k)(2) are each amended by
striking ``September 11, 2004'' each place it appears and
inserting ``January 1, 2006''.
(3) Election.--Clause (iii) of section 168(k)(2)(C) is
amended by adding at the end the following: ``The preceding
sentence shall be applied separately with respect to property
treated as qualified property by paragraph (4) and other
qualified property.''
(c) Conforming Amendments.--
(1) The subsection heading for section 168(k) is amended by
striking ``September 11, 2004'' and inserting ``January 1,
2006''.
(2) The heading for clause (i) of section 1400L(b)(2)(C) is
amended by striking ``30-percent additional allowable
property'' and inserting ``Bonus depreciation property under
section 168(k)''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 107A. INCREASED EXPENSING FOR SMALL BUSINESS.
(a) In General.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000 ($100,000 in the case of taxable
years beginning after 2002 and before 2008).''.
(b) Increase in Qualifying Investment at Which Phaseout
Begins.--Paragraph (2) of section 179(b) (relating to
reduction in limitation) is amended by inserting ``($400,000
in the case of taxable years beginning after 2002 and before
2008)'' after ``$200,000''.
(c) Off-the-Shelf Computer Software.--Paragraph (1) of
section 179(d) (defining section 179 property) is amended to
read as follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property (to which section 168 applies), or
``(ii) computer software (as defined in section
197(e)(3)(B)) which is described in section 197(e)(3)(A)(i),
to which section 167 applies, and which is placed in service
in a taxable year beginning after 2002 and before 2008,
``(B) which is section 1245 property (as defined in section
1245(a)(3)), and
``(C) which is acquired by purchase for use in the active
conduct of a trade or business.
Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating
units.''.
(d) Adjustment of Dollar Limit and Phaseout Threshold for
Inflation.--Subsection (b) of section 179 (relating to
limitations) is amended by adding at the end the following
new paragraph:
``(5) Inflation adjustments.--
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2003 and before 2008, the
$100,000 and $400,000 amounts in paragraphs (1) and (2) shall
each be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--
``(i) Dollar limitation.--If the amount in paragraph (1) as
increased under subparagraph (A) is not a multiple of $1,000,
such amount shall be rounded to the nearest multiple of
$1,000.
``(ii) Phaseout amount.--If the amount in paragraph (2) as
increased under subparagraph (A) is not a multiple of
$10,000, such amount shall be rounded to the nearest multiple
of $10,000.''.
(e) Revocation of Election.--Paragraph (2) of section
179(c) (relating to election irrevocable) is amended to read
as follows:
``(2) Revocation of election.--An election under paragraph
(1) with respect to any taxable year beginning after 2002 and
before 2008, and any specification contained in any such
election, may be revoked by the taxpayer with respect to any
property. Such revocation, once made, shall be
irrevocable.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
______
SA 587. Mr. JEFFORDS proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
After section 107, insert the following:
SEC. 107A. ACCELERATION OF MARRIAGE PENALTY RELIEF FOR EARNED
INCOME CREDIT.
(a) In General.--Section 32(b)(2)(B) (relating to joint
returns) is amended by striking ```increased by--'' and all
that follows and inserting ``increased by $3,000.''.
(b) Inflation Adjustment.--Clause (ii) of section 32(
j)(1)(B) (relating to inflation adjustments) is amended to
read as follows:
``(ii) in the case of the $3,000 amount in subsection
(b)(2)(B), by substituting `calendar year 2003' for `calendar
year 1992' in subparagraph (B) of such section 1.''.
(c) Conforming Amendment.--Section 303(i)(2) of the
Economic Growth and Tax Relief Reconciliation Act of 2001 is
amended by striking ``2004'' and inserting ``2003''.
(d) Adjustment of Highest Individual Income Tax Rate.--In
lieu of the rate specified for taxable years beginning during
calendar year 2003 and thereafter in the last column of the
table contained in section 1(i)(2) of the Internal Revenue
Code of 1986, as amended by section 102(a), the Secretary of
the Treasury shall adjust such rate for 1 or more of such
taxable years to provide such revenues as are necessary to
equal the loss in revenues which would result in the
enactment of the amendments made by subsections (a), (b), and
(c) of this section.
(e) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Conforming amendment.--The amendment made by subsection
(c) shall take effect on January 1, 2003.
______
SA 588. Mr. BAYH submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. CERTAIN POSTSECONDARY EDUCATIONAL BENEFITS
PROVIDED BY AN EMPLOYER TO CHILDREN OF
EMPLOYEES EXCLUDABLE FROM GROSS INCOME UNDER
EDUCATIONAL ASSISTANCE PROGRAMS.
(a) In General.--Section 127 (relating to educational
assistance programs) is amended by redesignating subsection
(d) as subsection (e), and inserting after subsection (c) the
following:
``(d) Post Secondary Educational Benefits Provided to
Children of Employees.--
``(1) In general.--For purposes of this section,
educational assistance provided by the employer to a child
(as defined in section 151(c)(3)) of an employee of such
employer pursuant to an educational assistance program shall
be treated as educational assistance provided for the
exclusive benefit of the employee.
``(2) Dollar limitations.--The amount excluded from the
gross income of the employee by reason of paragraph (1) for a
taxable year with respect to amounts provided to each child
of such employee shall not exceed $2,000.
``(3) Limitation on educational assistance.--Paragraph (1)
shall only apply to expenses paid or incurred in connection
with the enrollment or attendance of a child of an employee
at an educational institution described in section
529(e)(5).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the date of
enactment of this Act.
[[Page S6321]]
______
SA 589. Mr. BUNNING (for himself and Mr. McConnell) proposed an
amendment to the bill S. 1054, to provide for reconciliation pursuant
to section 201 of the concurrent resolution on the budget for fiscal
year 2004; as follows:
At the appropriate place, insert the following:
SECTION . SENSE OF THE SENATE ON REPEALING THE 1993 TAX
HIKE ON SOCIAL SECURITY BENEFITS SECTION .
(a) Findings.--
The 1993 tax on Social Security benefits was imposed as
part of the President Clinton's agenda to raise taxes;
The original 1993 tax hike on Social Security benefits was
to raise income taxes on Social Security retirees with as
little as $25,000 of income;
Repeated efforts to repeal the 1993 tax hike on Social
Security benefits have failed; and
Seniors rely on Social Security benefits as well as
dividend income to fund their retirement and they should have
taxes reduced on both sources of income:
(b) Sense of the Senate.--It is the Sense of the Senate
that the Senate Finance Committee should report out the
Social Security Benefits Tax Relief Act of 2003, S. 514, to
repeal the tax on seniors not later than July 31, 2003, and
the Senate shall consider such bill not later than September
30, 2003 in a manner consistent with the preservation of the
Medicare Trust Fund.
______
SA 590. Mr. GREGG submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. INTEREST RATES USED FOR PENSION PLANS; COMMISSION
ON DEFINED BENEFIT PLANS.
(a) Replacement of Interest Rate on 30-year Treasury
Securities with Interest Rate on Conservatively-Invested
Long-Term Corporate Bonds.--
(1) Internal Revenue Code of 1986.--
(A) In general.--Section 412(b)(5)(B)(ii)(I) of the
Internal Revenue Code of 1986 is amended--
(i) by striking ``not more than 10 percent above and, not
more than 10 percent below,'' and inserting ``not more than
10 percent below''; and
(ii) by striking ``the rates of interest on 30-year
Treasury securities'' and inserting ``conservative long-term
corporate bond rates''.
(B) Conservative long-term corporate bond rates.--Section
412(b)(5) of such Code is amended by adding at the end the
following new subparagraph:
``(C) Conservative long-term corporate bond rates.--The
Secretary shall, by regulation, prescribe a method for
periodically determining the conservative long-term corporate
bond rates for purposes of this paragraph. Such rates shall
reflect rates of interest on amounts conservatively invested
in long-term corporate bonds and shall be based on the use of
1 or more indices.''
(C) Amendment reflecting the change in the interest rate
calculation.--Section 412(b)(5)(B)(iii)(II) of such Code is
amended to read as follows:
``(II) consistent with the annual rate of return with
respect to amounts conservatively invested in long-term
corporate bonds.''
(D) Elimination of corridor.--Section 412(l)(7)(C) of such
code is amended by striking clause (i) and inserting the
following:
``(i) Interest rate.--The rate of interest used to
determine current liability under this subsection shall be
the rate of interest used under subsection (b)(5).''
(E) Determination of present value.--
(i) In general.--Section 417(e)(3)(A)(ii)(II) of such Code
is amended to read as follows:
``(II) Applicable interest rate.--The term `applicable
interest rate' means an annual rate of interest equal to the
conservative long-term corporate bond rate (as determined
under section 412(b)(5)(C)) for the month before the date of
distribution or such other time as the Secretary may by
regulations prescribe.''
(ii) Limitation on certain assumptions.--Section
415(b)(2)(E)(ii) of such Code is amended by striking ``the
applicable interest rate (as defined in section 417(e)(3))''
and inserting ``5.5 percent''.
(iii) Phase in of interest rate on long-term corporate
bonds.--Section 417(e)(3) of such Code is amended by adding
at the end the following:
``(C) Rules for phase in of interest rate on long-term
corporate bonds.--
``(i) In general.--In the case of a plan year specified in
the table in clause (ii), the applicable interest rate under
subparagraph (A)(ii)(II) shall be the lower of--
``(I) such applicable interest rate (without regard to this
subparagraph); or
``(II) the 30-year Treasury securities rate plus the
applicable percentage of the excess of such applicable
interest rate (without regard to this subparagraph) over the
30-year Treasury securities rate.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage shall be determined in accordance
with the following table:
``Plan year beginning in calendar year: Applicable
percentage:
2004.......................................................0 .
2005.......................................................0 .
2006......................................................20 .
2007......................................................40 .
2008......................................................60 .
2009......................................................80..
``(iii) Special rule for collectively bargained plans.--In
the case of a plan maintained pursuant to 1 or more
collective bargaining agreements between employee
representatives and 1 or more employers ratified by the date
of enactment of this subparagraph, in lieu of the 6 calendar
years specified in clause (ii), the years corresponding to
the applicable percentages in clause (ii) shall be the first
6 years in which clause (i) applies to employees covered by
any such agreement. This clause shall only apply to such
employees.''
(2) Employee Retirement Income Security Act of 1974.--
(A) In general.--Section 302(b)(5)(B)(ii)(I) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1082(b)(5)(B)(ii)(I)) is amended--
(i) by striking ``not more than 10 percent above and, not
more than 10 percent below,'' and inserting ``not more than
10 percent below''; and
(ii) by striking ``the rates of interest on 30-year
Treasury securities'' and inserting ``conservative long-term
corporate bond rates''.
(B) Conservative long-term corporate bond rates.--Section
302(b)(5) of such Act (29 U.S.C. 1082(b)(5)) is amended by
adding at the end the following new subparagraph:
``(C) Conservative long-term corporate bond rate.--The
Secretary of the Treasury shall, by regulation, prescribe a
method for periodically determining conservative long-term
corporate bond rates for purposes of this paragraph. Such
rates shall reflect rates of interest on amounts
conservatively invested in long-term corporate bonds and
shall be based on the use of 1 or more indices.''
(C) Amendment reflecting the change in the interest rate
calculation.--Section 302(b)(5)(B)(iii)(II) of such Act (29
U.S.C. 1082(b)(5)(B)(iii)(II)) is amended to read as follows:
``(II) consistent with the annual rate of return with
respect to amounts conservatively invested in long-term
corporate bonds.''
(D) Elimination of corridor.--Section 302(d)(7)(C) of such
Act is amended by striking clause (i) and inserting the
following:
``(i) Interest rate.--The rate of interest used to
determine current liability under this subsection shall be
the rate of interest used under subsection (b)(5).''
(E) Determination of present value.--
(i) In general.--Section 205(g)(3)(A)(ii)(II) of such Act
(29 U.S.C. 1055(g)(3)(A)(ii)(II)) is amended to read as
follows:
``(II) Applicable interest rate.--The term `applicable
interest rate' means an annual rate of interest equal to the
conservative long-term corporate bond rate (as determined
under section 302(b)(5)(C)) for the month before the date of
distribution or such other time as the Secretary may by
regulations prescribe.''
(ii) Phase in of interest rate on long-term corporate
bonds.--Section 205(g)(3) of such Act (29 U.S.C. 1055(g)(3))
is amended by adding at the end the following:
``(C) Rules for phase in of interest rate on long-term
corporate bonds.--
``(i) In general.--In the case of a plan year specified in
the table in clause (ii), the applicable interest rate under
subparagraph (A)(ii)(II) shall be the lower of--
``(I) such applicable interest rate (without regard to this
subparagraph); or
``(II) the 30-year Treasury securities rate plus the
applicable percentage of the excess of such applicable
interest rate (without regard to this subparagraph) over the
30-year Treasury securities rate.
``(ii) Applicable percentage.--For purposes of clause (i),
the applicable percentage shall be determined in accordance
with the following table:
``Plan year beginning in calendar year: Applicable
percentage:
2004.......................................................0 .
2005.......................................................0 .
2006......................................................20 .
2007......................................................40 .
2008......................................................60 .
2009......................................................80..
``(iii) Special rule for collectively bargained plans.--In
the case of a plan maintained pursuant to 1 or more
collective bargaining agreements between employee
representatives and 1 or more employers ratified by the date
of enactment of this subparagraph, in lieu of the 6 calendar
years specified in clause (ii), the years corresponding to
the applicable percentages in clause (ii) shall be the first
6 years in which clause (i) applies to employees covered by
any such agreement. This clause shall only apply to such
employees.''
(C) PBGC premium rates.--The first sentence of section
4006(a)(3)(E)(iii)(II) of such Act (29 U.S.C.
1306(a)(3)(E)(iii)(II)) is amended by striking ``the annual
yield on 30-year Treasury securities'' and inserting ``the
annual rate of interest equal to the long-term corporate bond
rate (as determined under section 302(b)(5)(C)''.
(b) Commission.--
(1) Establishment of the commission.--
(A) Establishment.--There is established the Commission on
Defined Benefit Pension Plans (in this Act referred to as the
``Commission'').
[[Page S6322]]
(B) Membership.--
(i) Composition.--The Commission shall be composed of 13
members of whom--
(I) 1 shall be the Secretary of Labor or their designee;
(II) 1 shall be the Secretary of the Treasury or their
designee;
(III) 1 shall be the Executive Director of the Pension
Benefit Guaranty Corporation;
(IV) 2 shall be appointed by the President from among
members of the general public;
(V) 1 shall be appointed by the chairman of the Committee
on Health, Education, Labor, and Pensions of the Senate;
(VI) 1 shall be appointed by the ranking minority member of
the Committee on Health, Education, Labor, and Pensions of
the Senate;
(VII) 1 shall be appointed by the chairman of the Committee
on Finance of the Senate;
(VIII) 1 shall be appointed by the ranking minority member
of the Committee on Finance of the Senate;
(IX) 1 shall be appointed by the chairman of the Committee
on Education and the Workforce of the House of
Representatives;
(X) 1 shall be appointed by the ranking minority member of
the Committee on Education and the Workforce of the House of
Representatives;
(XI) 1 shall be appointed by the chairman of the Committee
on Ways and Means of the House of Representatives; and
(XII) 1 shall be appointed by the ranking minority member
of the Committee on Ways and Means of the House of
Representatives.
(C) Period of appointment; vacancies.--Members shall be
appointed for the life of the Commission. Any vacancy in the
Commission shall not affect its powers, but shall be filled
in the same manner as the original appointment.
(D) Quorum.--A majority of the members of the Commission
shall constitute a quorum, but a lesser number of members may
hold hearings.
(E) Chairperson and vice chairperson.--The Commission shall
select a Chairperson and Vice Chairperson from among its
members.
(2) Duties of the commission.--
(A) Study and recommendations.--The Commission shall
conduct a thorough study of, and shall develop
recommendations on the following issues relating to defined
benefit pension plans:
(i) The most appropriate interest rate for funding
standards.
(ii) Methods for valuating liabilities, including the
private yield curve approach.
(iii) Funding rules.
(iv) Mandatory actuarial assumptions, including mortality
tables.
(v) Appropriate transition rules.
(vi) Other reforms to remove impediments or to create
incentives for the creation and expansion of defined benefit
plans.
(B) Report.--Not later than 6 months after the date of the
appointment of the last member of the Commission, the
Commission shall submit a report to the appropriate
committees of Congress containing a detailed statement of the
findings and conclusions of the Commission, together with its
recommendations for such legislation as it considers
appropriate.
(3) Powers of the commission.--
(A) Hearings.--The Commission may hold such hearings, sit
and act at such times and places, take such testimony, and
receive such evidence as the Commission considers advisable
to carry out this Act. The Commission shall, to the maximum
extent possible, use existing data and research prior to
holding such hearings.
(B) Information from federal agencies.--The Commission may
secure directly from any Federal department or agency such
information as the Commission considers necessary to carry
out this Act. Upon request of the Chairperson of the
Commission, the head of such department or agency shall
furnish such information to the Commission.
(C) Postal services.--The Commission may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(4) Commission personnel matters.--
(A) Compensation; travel expenses.--Each member of the
Commission shall serve without compensation but shall be
allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from their homes or regular places of
business in the performance of services for the Commission.
(B) Staff and equipment.--The Department of the Treasury
shall provide all financial, administrative, and staffing
requirements for the Commission including--
(i) office space;
(ii) furnishings; and
(iii) equipment.
(5) Termination of the commission.--The Commission shall
terminate 90 days after the date on which the Commission
submits its report under paragraph (2)(B).
(c) Effective Dates.--
(1) In general.--Except as provided in paragraphs (2), (3),
(4), and (5), the amendments made by this section shall apply
to years beginning after December 31, 2003.
(2) Survivor annuities.--Except as provided in paragraphs
(3) and (4), in the case of amendments made by this section
to section 417(e)(3) of the Internal Revenue Code of 1986 and
to section 205(g)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1055(g)(3)), and for purposes
of section 411(a)(11)(B) of the Internal Revenue Code of 1986
and section 203(e)(2) of the Employee Retirement Income
Security Act of 1974 (29 (U.S.C. 1053(e)(2)), such amendments
shall apply to years beginning after December 31, 2005.
(3) Lookback rules.--For purposes of applying all
applicable lookback rules in years beginning on or after the
otherwise applicable effective date determined under
paragraph (1), (2), or (4), the amendments made by this
section may be applied as if such amendments had been in
effect for all years beginning before such effective date.
For purposes of this paragraph, a lookback rule is a rule
that uses data from a prior year in determining requirements
applicable to the current year.
(4) Collective bargaining agreements.--Except as provided
in paragraph (3), in the case of a plan maintained pursuant
to 1 or more collective bargaining agreements between
employee representatives and 1 or more employers ratified by
the date of the enactment of this Act, the amendments
described in paragraph (2) shall not apply to employees
covered by any such agreement for plan years beginning before
the earlier of--
(A) the later of--
(i) the date on which the last of such collective
bargaining agreements terminates (determined without regard
to any extension thereof on or after such date of enactment);
or
(ii) January 1, 2006; or
(B) January 1, 2008.
(5) No reduction required.--In the case of any participant
or beneficiary, the amount payable under any form of benefit
subject to section 417(e)(3) of the Internal Revenue Code of
1986 shall not be required to be reduced below the amount
determined as of the last day of the last plan year beginning
before January 1, 2004, merely because of the amendments made
by subsection (a)(2)(A).
(d) Termination Date.--None of the amendments made by this
section shall apply to plan years beginning after December
31, 2008.
______
SA 591. Mr. KERRY (for himself and Mrs. Lincoln) submitted an
amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
On page ____, between lines ____ and ____, insert the
following:
SEC. ____. MEDICAID DSH ALLOTMENTS.
(a) Temporary Increase in Floor for Treatment as an
Extremely Low DSH State under the Medicaid Program.--
(1) In general.--Section 1923(f)(5) of the Social Security
Act (42 U.S.C. 1396r-4(f)(5)) is amended--
(A) by striking ``In the case of'' and inserting the
following:
``(A) In general.--In the case of''; and
(B) by adding at the end the following:
``(B) Temporary increase in floor for fiscal year 2004.--
During the period that begins on October 1, 2003, and ends on
September 30, 2004, subparagraph (A) shall be applied--
``(i) by substituting `fiscal year 2002' for `fiscal year
1999';
``(iii) by substituting `Centers for Medicare & Medicaid
Services' for `Health Care Financing Administration';
``(ii) by substituting `August 31, 2003' for `August 31,
2000';
``(iv) by substituting `3 percent' for `1 percent' each
place it appears;
``(v) by substituting `fiscal year 2004' for `fiscal year
2001'; and
``(vi) without regard to the second sentence.''.
(2) Effective date.--The amendments made by paragraph (1)
take effect on October 1, 2003, and apply to DSH allotments
under title XIX of the Social Security Act only with respect
to fiscal year 2004.
(b) Continuation of BIPA Rule for Determination of
Allotments for Fiscal Year 2003.--
(1) In general.--Section 1923(f)(4) of the Social Security
Act (42 U.S.C. 1396r-4(f)(4)) is amended--
(A) in the paragraph heading, by striking ``and 2002'' and
inserting ``through 2003'';
(B) in subparagraph (A)--
(i) in clause (i), by striking ``and'' at the end;
(ii) in clause (ii), by striking the period and inserting a
semicolon; and
(iii) by adding at the end the following:
``(iii) fiscal year 2003, shall be the DSH allotment
determined under clause (ii) increased, subject to
subparagraph (B) and paragraph (5), by the percentage change
in the Consumer Price Index for all urban consumers (all
items; U.S. city average) for fiscal year 2002.''; and
(C) in subparagraph (C)--
(i) in the subparagraph heading, by striking ``2002'' and
inserting ``2003''; and
(ii) by striking ``2003'' and inserting ``2004''.
(3) Conforming amendments.--Section 1923(f)(3) of such Act
(42 U.S.C. 1396r-4(f)(3)) is amended--
(A) in the paragraph heading, by striking ``2003'' and
inserting ``2004''; and
(B) by striking subparagraph (A) and inserting the
following:
``(A) In general.--The DSH allotment for any State--
``(i) for fiscal year 2004, is equal to the DSH allotment
determined for the State for fiscal
[[Page S6323]]
year 2002 under the table set forth in paragraph (2),
increased, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average), for each of
fiscal years 2002 and 2003; and
``(ii) for fiscal year 2005 and each succeeding fiscal
year, is equal to the DSH allotment determined for the State
for the preceding fiscal year under this paragraph,
increased, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average), for the
previous fiscal year.''.
(4) Effective date.--The amendments made by this subsection
shall take effect as if included in the enactment of section
701 of the Medicare, Medicaid, and SCHIP Benefits Improvement
and Protection Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106-554 (114 Stat. 2763A-569).
(c) Allotment Adjustment for Certain States.--
(1) In general.--Section 1923(f) of the Social Security Act
(42 U.S.C. 1396r-4(f)) is amended--
(A) by redesignating paragraph (6) as paragraph (7); and
(B) by inserting after paragraph (5) the following:
``(6) Allotment adjustment for certain states.--
``(A) Tennessee.--If the State-wide waiver approved under
section 1115 for the State of Tennessee with respect to the
requirements of this title (as in effect on the date of
enactment of this subsection) is revoked or terminated, the
Secretary shall--
``(i) permit the State of Tennessee to submit an amendment
to its State plan that would describe the methodology to be
used by the State (after the effective date of such
revocation or termination) to identify and make payments to
disproportionate share hospitals, including children's
hospitals and institutions for mental diseases or other
mental health facilities (other than State-owned institutions
or facilities), on the basis of the proportion of patients
served by such hospitals that are low-income patients with
special needs; and
``(ii) provide for purposes of this subsection for
computation of an appropriate DSH allotment for the State
that provides for the maximum amount (permitted consistent
with paragraph (3)(B)(ii)) that does not result in greater
expenditures under this title than would have been made if
such waiver had not been revoked or terminated.
``(B) Hawaii.--Effective for DSH allotments beginning with
fiscal year 2003, the Secretary shall compute a DSH allotment
for the State of Hawaii in the same manner as DSH allotments
are determined with respect to those States to which
paragraph (5) applies (but without regard to the requirement
under such paragraph that total expenditures under the State
plan for disproportionate share hospital adjustments for any
fiscal year exceeds 0).''.
(2) Treatment of institutions for mental diseases.--Section
1923(h)(1) of the Social Security Act (42 U.S.C. 1396r-
4(h)(1)) is amended--
(A) in paragraph (1), in the matter preceding subparagraph
(A), by inserting ``(subject to paragraph (3))'' after ``the
lesser of the following''; and
(B) by adding at the end the following new paragraph:
``(3) Special rule.--The limitation of paragraph (1) shall
not apply in the case of Tennessee in the case of a
revocation or termination of its statewide waiver described
in subsection (f)(6)(A).''.
(3) Effective date.--The amendment made by this subsection
shall take effect as if enacted on October 1, 2002.
(d) Funding.--Of the amount appropriated in section 371(e)
for fiscal year 2003 (after the application of section
1903(x) of the Social Security Act), an amount equal to the
amount required to carry out the amendments made by this
section for each of fiscal years 2003 through 2013 shall be
transferred and made available from the amount so
appropriated in section 371(e) (after such application) to
the Secretary of Health and Human Services to carry out the
amendments made by this section.
______
SA 592. Mr. VOINOVICH submitted an amendment intended to be proposed
by him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; as follows:
At the appropriate place insert the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fundamental Tax Reform
Commission Act of 2003''.
SEC. 2. ESTABLISHMENT OF COMMISSION.
(1) Establishment.--There is established the ``Blue Ribbon
Commission on Comprehensive Tax Reform'' (in this Act
referred to as the ``Commission'').
(b) Membership.--
(1) Composition.--The Commission shall be composed of 12
members of whom--
(A) 1 shall be the Chairman of the Board of Governors of
the Federal Reserve System;
(B) 1 shall be the Vice chairman of the Board of Governors
of the Federal Reserve System;
(C) 1 shall be the Commissioner of Internal Revenue;
(D) 2 shall be appointed by the majority leader of the
Senate;
(E) 1 shall be appointed by the minority leader of the
Senate;
(F) 2 shall be appointed by the Speaker of the House of
Representatives;
(G) 1 shall be appointed by the minority leader of the
House of Representatives; and
(H) 3 shall be appointed by the President, of which--
(i) no more than 2 shall be of the same party as the
President; and
(ii) 1 may be the Secretary of the Treasury.
(2) Federal employees.--The members of the Commission may
be employees or former employees of the Federal Government.
(3) Date.--The appointments of the members of the
Commission shall be made not later than July 30, 2003.
(c) Period of Appointment; Vacancies.--Members shall be
appointed for the life of the Commission. Any vacancy in the
Commission shall not affect its powers, but shall be filled
in the same manner as the original appointment.
(d) Initial Meeting.--!Not later than 30 days after the
date on which all members of the commission have been
appointed, the Commission shall hold its first meeting.
(e) Meetings.--The Commission shall meet at the call of the
Chairman.
(f) Quorum.--A majority of the members of the Commission
shall constitute a quorum, but a lesser number of members may
hold hearings.
(g) Chairman and Vice Chairman.--The President shall select
a Chairman and Vice Chairman from among its members.
SEC. 3. DUTIES OF THE COMMISSION.
(a) Study.--The Commission shall conduct a thorough study
of all matters relating to a comprehensive reform of the
Federal tax system, including the reform of the Internal
Revenue Code of 1986 and the implementation (if appropriate)
of other types of tax systems.
(b) Recommendations.--The Commission shall develop
recommendations on how to comprehensively reform the Federal
tax system in a manner that generates appropriate revenue for
the Federal Government.
(c) Report.--Not later than 18 months after the date on
which all initial members of the commission have been
appointed pursuant to section 2(b), the Commission shall
submit a report to the President and Congress which shall
contain a detailed statement of the findings and conclusions
of the Commission, together with its recommendations for such
legislation and administrative actions as it considers
appropriate.
SEC. 4. POWERS OF THE COMMISSION.
(a) Hearings.--The Commission may hold such hearings, sit
and act at such times and places, take such testimony, and
receive such evidence as the Commission considers advisable
to carry out this Act.
(b) Information From Federal Agencies.--The Commission may
secure directly from any Federal department or agency such
information as the Commission considers necessary to carry
out this Act. Upon request of the Chairman of the Commission,
the head of such department or agency shall furnish such
information to the Commission.
(c) Postal Services.--The Commission may use the United
States mails in the same manner and under the same conditions
as other departments and agencies of the Federal Government.
(d) Gifts.--The Commission may accept, use, and dispose of
gifts or donations of services or property.
SEC. 5. COMMISSION PERSONNEL MATTERS.
(a) Compensation of Members.--Each member of the Commission
who is not an officer or employee of the Federal Government
shall be compensated at a rate equal to the daily equivalent
of the annual rate of basic pay prescribed for level IV of
the Executive Schedule under section 5315 of title 5, United
States Code, for each day (including travel time) during
which such member is engaged in the performance of the duties
of the Commission. All members of the Commission who are
officers or employees of the United States shall serve
without compensation in addition to that received for their
services as officers or employees of the United States.
(b) Travel Expenses.--The members of the Commission shall
be allowed travel expenses, including per diem in lieu of
subsistence, at rates authorized for employees of agencies
under subchapter I of chapter 57 of title 5, United States
Code, while away from their homes or regular places of
business in the performance of services for the
Commission.
(c) Staff.--
(1) In general.--The Chairman of the Commission may,
without regard to the civil service laws and regulations,
appoint and terminate an executive director and such other
additional personnel as may be necessary to enable the
Commission to perform its duties. The employment of an
executive director shall be subject to confirmation by the
Commission.
(2) Compensation.--The Chairman of the Commission may fix
the compensation of the executive director and other
personnel without regard to chapter 51 and subchapter III of
chapter 53 of title 5, United States Code, relating to
classification of positions and General Schedule pay rates,
except that the rate of pay for the executive director and
other personnel may not exceed the rate payable for level V
of the Executive Schedule under section 5316 of such title.
(d) Detail of Government Employees.--Any Federal Government
employee may be
[[Page S6324]]
detailed to the Commission without reimbursement, and such
detail shall be without interruption or loss of civil service
status or privilege.
(e) Procurement of Temporary and Intermittent Services.--
The Chairman of the Commission may procure temporary and
intermittent services under section 3109(b) of title 5,
United States Code, at rates for individuals which do not
exceed the daily equivalent of the annual rate of basic pay
prescribed for level V of the Executive Schedule under
section 5316 of such title.
SEC. 6. TERMINATION OF THE COMMISSION.
The Commission shall terminate 90 days after the date on
which the Commission submits its report under section 3.
SEC. 7. AUTHORIZATION OF APPROPRIATIONS.
There are authorized to be appropriated such sums as are
necessary to the commission to carry out this Act.
______
SA 593. Mr. BURNS (for himself, Mr. Rockefeller, Mr. Baucus, Mrs.
Clinton, Mr. Johnson, and Mr. Kennedy) proposed an amendment to the
bill S. 1054, to provide for reconciliation pursuant to section 201 of
the concurrent resolution on the budget for fiscal year 2004; as
follows:
At the end of subtitle C of title V, add the following:
SEC. ____. EXPENSING OF BROADBAND INTERNET ACCESS
EXPENDITURES.
(a) In General.--Part VI of subchapter B of chapter 1
(relating to itemized deductions for individuals and
corporations) is amended by inserting after section 190 the
following new section:
``SEC. 191. BROADBAND EXPENDITURES.
``(a) Treatment of Expenditures.--
``(1) In general.--A taxpayer may elect to treat any
qualified broadband expenditure which is paid or incurred by
the taxpayer as an expense which is not chargeable to capital
account. Any expenditure which is so treated shall be allowed
as a deduction.
``(2) Election.--An election under paragraph (1) shall be
made at such time and in such manner as the Secretary may
prescribe by regulation.
``(b) Qualified Broadband Expenditures.--For purposes of
this section--
``(1) In general.--The term `qualified broadband
expenditure' means, with respect to any taxable year, any
direct or indirect costs incurred and properly taken into
account with respect to the purchase or installation of
qualified equipment (including any upgrades thereto),
together with any direct or indirect costs incurred and
properly taken into account with respect to the connection of
such qualified equipment to any qualified subscriber, but
only if such costs are incurred after December 31, 2003, and
before January 1, 2005.
``(2) Certain satellite expenditures excluded.--Such term
shall not include any costs incurred with respect to the
launching of any satellite equipment.
``(3) Leased equipment.--Such term shall include so much of
the purchase price paid by the lessor of equipment subject to
a lease described in subsection (c)(2)(B) as is attributable
to expenditures incurred by the lessee which would otherwise
be described in paragraph (1).
``(4) Limitation with regard to current generation
broadband services.--Only 50 percent of the amounts taken
into account under paragraph (1) with respect to qualified
equipment through which current generation broadband services
are provided shall be treated as qualified broadband
expenditures.
``(c) When Expenditures Taken Into Account.--For purposes
of this section--
``(1) In general.--Qualified broadband expenditures with
respect to qualified equipment shall be taken into account
with respect to the first taxable year in which--
``(A) current generation broadband services are provided
through such equipment to qualified subscribers, or
``(B) next generation broadband services are provided
through such equipment to qualified subscribers.
``(2) Limitation.--
``(A) In general.--Qualified expenditures shall be taken
into account under paragraph (1) only with respect to
qualified equipment--
``(i) the original use of which commences with the
taxpayer, and
``(ii) which is placed in service,
after December 31, 2003.
``(B) Sale-leasebacks.--For purposes of subparagraph (A),
if property--
``(i) is originally placed in service after December 31,
2003, by any person, and
``(ii) sold and leased back by such person within 3 months
after the date such property was originally placed in
service,
such property shall be treated as originally placed in
service not earlier than the date on which such property is
used under the leaseback referred to in clause (ii).
``(d) Special Allocation Rules.--
``(1) Current generation broadband services.--For purposes
of determining the amount of qualified broadband expenditures
under subsection (a)(1) with respect to qualified equipment
through which current generation broadband services are
provided, if the qualified equipment is capable of serving
both qualified subscribers and other subscribers, the
qualified broadband expenditures shall be multiplied by a
fraction--
``(A) the numerator of which is the sum of the number of
potential qualified subscribers within the rural areas and
the underserved areas which the equipment is capable of
serving with current generation broadband services, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with current generation broadband
services.
``(2) Next generation broadband services.--For purposes of
determining the amount of qualified broadband expenditures
under subsection (a)(1) with respect to qualified equipment
through which next generation broadband services are
provided, if the qualified equipment is capable of serving
both qualified subscribers and other subscribers, the
qualified expenditures shall be multiplied by a fraction--
``(A) the numerator of which is the sum of--
``(i) the number of potential qualified subscribers within
the rural areas and underserved areas, plus
``(ii) the number of potential qualified subscribers within
the area consisting only of residential subscribers not
described in clause (i),
which the equipment is capable of serving with next
generation broadband services, and
``(B) the denominator of which is the total potential
subscriber population of the area which the equipment is
capable of serving with next generation broadband services.
``(e) Definitions.--For purposes of this section--
``(1) Antenna.--The term `antenna' means any device used to
transmit or receive signals through the electromagnetic
spectrum, including satellite equipment.
``(2) Cable operator.--The term `cable operator' has the
meaning given such term by section 602(5) of the
Communications Act of 1934 (47 U.S.C. 522(5)).
``(3) Commercial mobile service carrier.--The term
`commercial mobile service carrier' means any person
authorized to provide commercial mobile radio service as
defined in section 20.3 of title 47, Code of Federal
Regulations.
``(4) Current generation broadband service.--The term
`current generation broadband service' means the transmission
of signals at a rate of at least 1,000,000 bits per second to
the subscriber and at least 128,000 bits per second from the
subscriber.
``(5) Multiplexing or demultiplexing.--The term
`multiplexing' means the transmission of 2 or more signals
over a single channel, and the term `demultiplexing' means
the separation of 2 or more signals previously combined by
compatible multiplexing equipment.
``(6) Next generation broadband service.--The term `next
generation broadband service' means the transmission of
signals at a rate of at least 22,000,000 bits per second to
the subscriber and at least 5,000,000 bits per second from
the subscriber.
``(7) Nonresidential subscriber.--The term `nonresidential
subscriber' means any person who purchases broadband services
which are delivered to the permanent place of business of
such person.
``(8) Open video system operator.--The term `open video
system operator' means any person authorized to provide
service under section 653 of the Communications Act of 1934
(47 U.S.C. 573).
``(9) Other wireless carrier.--The term `other wireless
carrier' means any person (other than a telecommunications
carrier, commercial mobile service carrier, cable operator,
open video system operator, or satellite carrier) providing
current generation broadband services or next generation
broadband service to subscribers through the radio
transmission of energy.
``(10) Packet switching.--The term `packet switching' means
controlling or routing the path of any digitized transmission
signal which is assembled into packets or cells.
``(11) Provider.--The term `provider' means, with respect
to any qualified equipment--
``(A) a cable operator,
``(B) a commercial mobile service carrier,
``(C) an open video system operator,
``(D) a satellite carrier,
``(E) a telecommunications carrier, or
``(F) any other wireless carrier,
providing current generation broadband services or next
generation broadband services to subscribers through such
qualified equipment.
``(12) Provision of services.--A provider shall be treated
as providing services to 1 or more subscribers if--
``(A) such a subscriber has been passed by the provider's
equipment and can be connected to such equipment for a
standard connection fee,
``(B) the provider is physically able to deliver current
generation broadband services or next generation broadband
services, as applicable, to such a subscriber without making
more than an insignificant investment with respect to such
subscriber,
``(C) the provider has made reasonable efforts to make such
subscribers aware of the availability of such services,
``(D) such services have been purchased by 1 or more such
subscribers, and
``(E) such services are made available to such subscribers
at average prices comparable to those at which the provider
makes available similar services in any areas in which the
provider makes available such services.
``(13) Qualified equipment.--
``(A) In general.--The term `qualified equipment' means
equipment which provides current generation broadband
services or next generation broadband services--
[[Page S6325]]
``(i) at least a majority of the time during periods of
maximum demand to each subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no deduction is allowed under
subsection (a)(1).
``(B) Only certain investment taken into account.--Except
as provided in subparagraph (C) or (D), equipment shall be
taken into account under subparagraph (A) only to the extent
it--
``(i) extends from the last point of switching to the
outside of the unit, building, dwelling, or office owned or
leased by a subscriber in the case of a telecommunications
carrier,
``(ii) extends from the customer side of the mobile
telephone switching office to a transmission/receive antenna
(including such antenna) owned or leased by a subscriber in
the case of a commercial mobile service carrier,
``(iii) extends from the customer side of the headend to
the outside of the unit, building, dwelling, or office owned
or leased by a subscriber in the case of a cable operator or
open video system operator, or
``(iv) extends from a transmission/receive antenna
(including such antenna) which transmits and receives signals
to or from multiple subscribers, to a transmission/receive
antenna (including such antenna) on the outside of the unit,
building, dwelling, or office owned or leased by a subscriber
in the case of a satellite carrier or other wireless carrier,
unless such other wireless carrier is also a
telecommunications carrier.
``(C) Packet switching equipment.--Packet switching
equipment, regardless of location, shall be taken into
account under subparagraph (A) only if it is deployed in
connection with equipment described in subparagraph (B) and
is uniquely designed to perform the function of packet
switching for current generation broadband services or next
generation broadband services, but only if such packet
switching is the last in a series of such functions performed
in the transmission of a signal to a subscriber or the first
in a series of such functions performed in the transmission
of a signal from a subscriber.
``(D) Multiplexing and demultiplexing equipment.--
Multiplexing and demultiplexing equipment shall be taken into
account under subparagraph (A) only to the extent it is
deployed in connection with equipment described in
subparagraph (B) and is uniquely designed to perform the
function of multiplexing and demultiplexing packets or cells
of data and making associated application adaptions, but only
if such multiplexing or demultiplexing equipment is located
between packet switching equipment described in subparagraph
(C) and the subscriber's premises.
``(14) Qualified subscriber.--The term `qualified
subscriber' means--
``(A) with respect to the provision of current generation
broadband services--
``(i) any nonresidential subscriber maintaining a permanent
place of business in a rural area or underserved area, or
``(ii) any residential subscriber residing in a dwelling
located in a rural area or underserved area which is not a
saturated market, and
``(B) with respect to the provision of next generation
broadband services--
``(i) any nonresidential subscriber maintaining a permanent
place of business in a rural area or underserved area, or
``(ii) any residential subscriber.
``(15) Residential subscriber.--The term `residential
subscriber' means any individual who purchases broadband
services which are delivered to such individual's dwelling.
``(16) Rural area.--The term `rural area' means any census
tract which--
``(A) is not within 10 miles of any incorporated or census
designated place containing more than 25,000 people, and
``(B) is not within a county or county equivalent which has
an overall population density of more than 500 people per
square mile of land.
``(17) Rural subscriber.--The term `rural subscriber' means
any residential subscriber residing in a dwelling located in
a rural area or nonresidential subscriber maintaining a
permanent place of business located in a rural area.
``(18) Satellite carrier.--The term `satellite carrier'
means any person using the facilities of a satellite or
satellite service licensed by the Federal Communications
Commission and operating in the Fixed-Satellite Service under
part 25 of title 47 of the Code of Federal Regulations or the
Direct Broadcast Satellite Service under part 100 of title 47
of such Code to establish and operate a channel of
communications for distribution of signals, and owning or
leasing a capacity or service on a satellite in order to
provide such point-to-multipoint distribution.
``(19) Saturated market.--The term `saturated market' means
any census tract in which, as of the date of the enactment of
this section--
``(A) current generation broadband services have been
provided by a single provider to 85 percent or more of the
total number of potential residential subscribers residing in
dwellings located within such census tract, and
``(B) such services can be utilized--
``(i) at least a majority of the time during periods of
maximum demand by each such subscriber who is utilizing such
services, and
``(ii) in a manner substantially the same as such services
are provided by the provider to subscribers through equipment
with respect to which no deduction is allowed under
subsection (a)(1).
``(20) Subscriber.--The term `subscriber' means any person
who purchases current generation broadband services or next
generation broadband services.
``(21) Telecommunications carrier.--The term
`telecommunications carrier' has the meaning given such term
by section 3(44) of the Communications Act of 1934 (47 U.S.C.
153(44)), but--
``(A) includes all members of an affiliated group of which
a telecommunications carrier is a member, and
``(B) does not include a commercial mobile service carrier.
``(22) Total potential subscriber population.--The term
`total potential subscriber population' means, with respect
to any area and based on the most recent census data, the
total number of potential residential subscribers residing in
dwellings located in such area and potential nonresidential
subscribers maintaining permanent places of business located
in such area.
``(23) Underserved area.--The term `underserved area' means
any census tract which is located in--
``(A) an empowerment zone or enterprise community
designated under section 1391,
``(B) the District of Columbia Enterprise Zone established
under section 1400,
``(C) a renewal community designated under section 1400E,
or
``(D) a low-income community designated under section 45D.
``(24) Underserved subscriber.--The term `underserved
subscriber' means any residential subscriber residing in a
dwelling located in an underserved area or nonresidential
subscriber maintaining a permanent place of business located
in an underserved area.
``(f) Special Rules.--
``(1) Property used outside the united states, etc., not
qualified.--No expenditures shall be taken into account under
subsection (a)(1) with respect to the portion of the cost of
any property referred to in section 50(b) or with respect to
the portion of the cost of any property taken into account
under section 179.
``(2) Basis reduction.--
``(A) In general.--For purposes of this title, the basis of
any property shall be reduced by the portion of the cost of
such property taken into account under subsection (a)(1).
``(B) Ordinary income recapture.--For purposes of section
1245, the amount of the deduction allowable under subsection
(a)(1) with respect to any property which is of a character
subject to the allowance for depreciation shall be treated as
a deduction allowed for depreciation under section 167.
``(3) Coordination with section 38.--No credit shall be
allowed under section 38 with respect to any amount for which
a deduction is allowed under subsection (a)(1).''.
(b) Special Rule for Mutual or Cooperative Telephone
Companies.--Section 501(c)(12)(B) (relating to list of exempt
organizations) is amended by striking ``or'' at the end of
clause (iii), by striking the period at the end of clause
(iv) and inserting ``, or'', and by adding at the end the
following:
``(v) from the sale of property subject to a lease
described in section 191(c)(2)(B), but only to the extent
such income does not in any year exceed an amount equal to
the qualified broadband expenditures which would be taken
into account under section 191 for such year if the mutual or
cooperative telephone company was not exempt from taxation
and was treated as the owner of the property subject to such
lease.''.
(c) Conforming Amendments.--
(1) Section 263(a)(1) (relating to capital expenditures) is
amended by striking ``or'' at the end of subparagraph (G), by
striking the period at the end of subparagraph (H) and
inserting ``, or'', and by adding at the end the following
new subparagraph:
``(I) expenditures for which a deduction is allowed under
section 191.''.
(2) Section 1016(a) of such Code is amended by striking
``and'' at the end of paragraph (27), by striking the period
at the end of paragraph (28) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(29) to the extent provided in section 191(f)(2).''.
(3) The table of sections for part VI of subchapter A of
chapter 1 of such Code is amended by inserting after the item
relating to section 190 the following new item:
``Sec. 191. Broadband expenditures.''.
(d) Designation of Census Tracts.--
(1) In general.--The Secretary of the Treasury shall, not
later than 90 days after the date of the enactment of this
Act, designate and publish those census tracts meeting the
criteria described in paragraphs (16), (22), and (23) of
section 191(e) of the Internal Revenue Code of 1986 (as
added by this section). In making such designations, the
Secretary of the Treasury shall consult with such other
departments and agencies as the Secretary determines
appropriate.
(2) Saturated market.--
(A) In general.--For purposes of designating and publishing
those census tracts meeting the criteria described in
subsection (e)(19) of such section 191--
(i) the Secretary of the Treasury shall prescribe not later
than 30 days after the date of the enactment of this Act the
form upon which any provider which takes the position that it
meets such criteria with respect to any census tract shall
submit a list of such
[[Page S6326]]
census tracts (and any other information required by the
Secretary) not later than 60 days after the date of the
publication of such form, and
(ii) the Secretary of the Treasury shall publish an
aggregate list of such census tracts and the applicable
providers not later than 30 days after the last date such
submissions are allowed under clause (i).
(B) No subsequent lists required.--The Secretary of the
Treasury shall not be required to publish any list of census
tracts meeting such criteria subsequent to the list described
in subparagraph (A)(ii).
(C) Authority to disregard false submissions.--In addition
to imposing any other applicable penalties, the Secretary of
the Treasury shall have the discretion to disregard any form
described in subparagraph (A)(i) on which a provider
knowingly submitted false information.
(e) Other Regulatory Matters.--
(1) Prohibition.--No Federal or State agency or
instrumentality shall adopt regulations or ratemaking
procedures that would have the effect of confiscating any
deduction or portion thereof allowed under section 191 of the
Internal Revenue Code of 1986 (as added by this section) or
otherwise subverting the purpose of this section.
(2) Treasury regulatory authority.--It is the intent of
Congress in providing the election to deduct qualified
broadband expenditures under section 191 of the Internal
Revenue Code of 1986 (as added by this section) to provide
incentives for the purchase, installation, and connection of
equipment and facilities offering expanded broadband access
to the Internet for users in certain low income and rural
areas of the United States, as well as to residential users
nationwide, in a manner that maintains competitive neutrality
among the various classes of providers of broadband services.
Accordingly, the Secretary of the Treasury shall prescribe
such regulations as may be necessary or appropriate to carry
out the purposes of section 191 of such Code, including--
(A) regulations to determine how and when a taxpayer that
incurs qualified broadband expenditures satisfies the
requirements of section 191 of such Code to provide broadband
services, and
(B) regulations describing the information, records, and
data taxpayers are required to provide the Secretary to
substantiate compliance with the requirements of section 191
of such Code.
(f) Effective Date.--The amendments made by this section
shall apply to expenditures incurred after December 31, 2003.
______
SA 594. Mr. GRASSLEY proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the end of subtitle C of title V, add the following:
Subtitle D--Medicare Provisions
SEC. 531. EQUALIZING URBAN AND RURAL STANDARDIZED PAYMENT
AMOUNTS UNDER THE MEDICARE INPATIENT HOSPITAL
PROSPECTIVE PAYMENT SYSTEM.
(a) In General.--Section 1886(d)(3)(A)(iv) of the Social
Security Act (42 U.S.C. 1395ww(d)(3)(A)(iv)) is amended--
(1) by striking ``(iv) For discharges'' and inserting
``(iv)(I) Subject to subclause (II), for discharges''; and
(2) by adding at the end the following new subclause:
``(II) For discharges occurring in a fiscal year beginning
with fiscal year 2004, the Secretary shall compute a
standardized amount for hospitals located in any area within
the United States and within each region equal to the
standardized amount computed for the previous fiscal year
under this subparagraph for hospitals located in a large
urban area (or, beginning with fiscal year 2005, for
hospitals located in any area) increased by the applicable
percentage increase under subsection (b)(3)(B)(i) for the
fiscal year involved.''.
(b) Conforming Amendments.--
(1) Computing drg-specific rates.--Section 1886(d)(3)(D) of
the Social Security Act (42 U.S.C. 1395ww(d)(3)(D)) is
amended--
(A) in the heading, by striking ``in different areas'';
(B) in the matter preceding clause (i), by striking ``,
each of'';
(C) in clause (i)--
(i) in the matter preceding subclause (I), by inserting
``for fiscal years before fiscal year 2004,'' before ``for
hospitals''; and
(ii) in subclause (II), by striking ``and'' after the
semicolon at the end;
(D) in clause (ii)--
(i) in the matter preceding subclause (I), by inserting
``for fiscal years before fiscal year 2004,'' before ``for
hospitals''; and
(ii) in subclause (II), by striking the period at the end
and inserting ``; and''; and
(E) by adding at the end the following new clause:
``(iii) for a fiscal year beginning after fiscal year 2003,
for hospitals located in all areas, to the product of--
``(I) the applicable standardized amount (computed under
subparagraph (A)), reduced under subparagraph (B), and
adjusted or reduced under subparagraph (C) for the fiscal
year; and
``(II) the weighting factor (determined under paragraph
(4)(B)) for that diagnosis-related group.''.
(2) Technical conforming sunset.--Section 1886(d)(3) of the
Social Security Act (42 U.S.C. 1395ww(d)(3)) is amended--
(A) in the matter preceding subparagraph (A), by inserting
``, for fiscal years before fiscal year 1997,'' before ``a
regional adjusted DRG prospective payment rate''; and
(B) in subparagraph (D), in the matter preceding clause
(i), by inserting ``, for fiscal years before fiscal year
1997,'' before ``a regional DRG prospective payment rate for
each region,''.
SEC. 532. FAIRNESS IN THE MEDICARE DISPROPORTIONATE SHARE
HOSPITAL (DSH) ADJUSTMENT FOR RURAL HOSPITALS.
(a) Equalizing DSH Payment Amounts.--
(1) In general.--Section 1886(d)(5)(F)(vii) of the Social
Security Act (42 U.S.C. 1395ww(d)(5)(F)(vii)) is amended by
inserting ``, and, after October 1, 2003, for any other
hospital described in clause (iv),'' after ``clause (iv)(I)''
in the matter preceding subclause (I).
(2) Conforming amendments.--Section 1886(d)(5)(F) of the
Social Security Act (42 U.S.C. 1395ww(d)(5)(F)) is amended--
(A) in clause (iv)--
(i) in subclause (II)--
(I) by inserting ``and before October 1, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, is equal to the percent determined in
accordance with the applicable formula described in clause
(vii)'' after ``clause (xiii)'';
(ii) in subclause (III)--
(I) by inserting ``and before October 1, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, is equal to the percent determined in
accordance with the applicable formula described in clause
(vii)'' after ``clause (xii)'';
(iii) in subclause (IV)--
(I) by inserting ``and before October 1, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, is equal to the percent determined in
accordance with the applicable formula described in clause
(vii)'' after ``clause (x) or (xi)'';
(iv) in subclause (V)--
(I) by inserting ``and before October 1, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, is equal to the percent determined in
accordance with the applicable formula described in clause
(vii)'' after ``clause (xi)''; and
(v) in subclause (VI)--
(I) by inserting ``and before October 1, 2003,'' after
``April 1, 2001,''; and
(II) by inserting ``or, for discharges occurring on or
after October 1, 2003, is equal to the percent determined in
accordance with the applicable formula described in clause
(vii)'' after ``clause (x)'';
(B) in clause (viii), by striking ``The formula'' and
inserting ``For discharges occurring before October 1, 2003,
the formula''; and
(C) in each of clauses (x), (xi), (xii), and (xiii), by
striking ``For purposes'' and inserting ``With respect to
discharges occurring before October 1, 2003, for purposes''.
(b) Effective Date.--The amendments made by this section
shall apply with respect to discharges occurring on or after
October 1, 2003.
SEC. 533. MEDICARE INPATIENT HOSPITAL PAYMENT ADJUSTMENT FOR
LOW-VOLUME HOSPITALS.
Section 1886(d) of the Social Security Act (42 U.S.C.
1395ww(d)) is amended by adding at the end the following new
paragraph:
``(12) Payment adjustment for low-volume hospitals.--
``(A) Payment adjustment.--
``(i) In general.--Notwithstanding any other provision of
this section, for each cost reporting period (beginning with
the cost reporting period that begins in fiscal year 2005),
the Secretary shall provide for an additional payment amount
to each low-volume hospital (as defined in clause (iii)) for
discharges occurring during that cost reporting period to
increase the amount paid to such hospital under this section
for such discharges by the applicable percentage increase
determined under clause (ii).
``(ii) Applicable percentage increase.--The Secretary shall
determine a percentage increase applicable under this
paragraph that ensures that--
``(I) no percentage increase in payments under this
paragraph exceeds 25 percent of the amount of payment that
would otherwise be made to a low-volume hospital under this
section for each discharge (but for this paragraph);
``(II) low-volume hospitals that have the lowest number of
discharges during a cost reporting period receive the highest
percentage increase in payments due to the application of
this paragraph; and
``(III) the percentage increase in payments due to the
application of this paragraph is reduced as the number of
discharges per cost reporting period increases.
``(iii) Low-volume hospital defined.--For purposes of this
paragraph, the term `low-volume hospital' means, for a cost
reporting period, a subsection (d) hospital (as defined in
paragraph (1)(B)) other than a critical access hospital (as
defined in section 1861(mm)(1)) that--
``(I) the Secretary determines had an average of less than
2,000 discharges (determined with respect to all patients and
not just individuals receiving benefits under this title)
during the 3 most recent cost reporting periods for which
data are available that precede
[[Page S6327]]
the cost reporting period to which this paragraph applies;
and
``(II) is located at least 15 miles from a similar hospital
(or is deemed by the Secretary to be so located by reason of
such factors as the Secretary determines appropriate,
including the time required for an individual to travel to
the nearest alternative source of appropriate inpatient care
(taking into account the location of such alternative source
of inpatient care and any weather or travel conditions that
may affect such travel time)).
``(B) Prohibiting certain reductions.--Notwithstanding
subsection (e), the Secretary shall not reduce the payment
amounts under this section to offset the increase in payments
resulting from the application of subparagraph (A).''.
SEC. 534. ADJUSTMENT TO THE MEDICARE INPATIENT HOSPITAL PPS
WAGE INDEX TO REVISE THE LABOR-RELATED SHARE OF
SUCH INDEX.
(a) In General.--Section 1886(d)(3)(E) of the Social
Security Act (42 U.S.C. 1395ww(d)(3)(E)) is amended--
(1) by striking ``wage levels.--The Secretary'' and
inserting ``wage levels.--
``(i) In general.--Except as provided in clause (ii), the
Secretary''; and
(2) by adding at the end the following new clause:
``(ii) Alternative proportion to be adjusted beginning in
fiscal year 2004.--
``(I) In general.--Except as provided in subclause (II),
for discharges occurring on or after October 1, 2003, the
Secretary shall substitute `62 percent' for the proportion
described in the first sentence of clause (i).
``(II) Hold harmless for certain hospitals.--If the
application of subclause (I) would result in lower payments
to a hospital than would otherwise be made, then this
subparagraph shall be applied as if this clause had not been
enacted.''.
(b) Waiving Budget Neutrality.--Section 1886(d)(3)(E) of
the Social Security Act (42 U.S.C. 1395ww(d)(3)(E)), as
amended by subsection (a), is amended by adding at the end of
clause (i) the following new sentence: ``The Secretary shall
apply the previous sentence for any period as if the
amendments made by section 534(a) of the Jobs and Growth Tax
Relief Reconciliation Act of 2003 had not been enacted.''.
SEC. 535. ONE-YEAR EXTENSION OF HOLD HARMLESS PROVISIONS FOR
SMALL RURAL HOSPITALS AND TEMPORARY TREATMENT
OF CERTAIN SOLE COMMUNITY HOSPITALS TO LIMIT
DECLINE IN PAYMENT UNDER THE OPD PPS.
(a) Hold Harmless Provisions.--Section 1833(t)(7)(D)(i) of
the Social Security Act (42 U.S.C. 1395l(t)(7)(D)(i)) is
amended--
(1) in the heading, by striking ``small'' and inserting
``certain'';
(2) by inserting ``or a sole community hospital (as defined
in section 1886(d)(5)(D)(iii)) located in a rural area''
after ``100 beds''; and
(3) by striking ``2004'' and inserting ``2005''.
(b) Effective Date.--The amendment made by subsection
(a)(2) shall apply with respect to payment for OPD services
furnished on and after January 1, 2004.
SEC. 536. CRITICAL ACCESS HOSPITAL (CAH) IMPROVEMENTS.
(a) Permitting Hospitals To Allocate Swing Beds and Acute
Care Inpatient Beds Subject to a Total Limit of 25 Beds.--
(1) In general.--Section 1820(c)(2)(B)(iii) of the Social
Security Act (42 U.S.C. 1395i-4(c)(2)(B)(iii)) is amended to
read as follows:
``(iii) provides not more than a total of 25 extended care
service beds (pursuant to an agreement under subsection (f))
or acute care inpatient beds (meeting such standards as the
Secretary may establish) for providing inpatient care for a
period that does not exceed, as determined on an annual,
average basis, 96 hours per patient;''.
(2) Conforming amendment.--Section 1820(f) of the Social
Security Act (42 U.S.C. 1395i-4(f)) is amended by striking
``and the number of beds used at any time for acute care
inpatient services does not exceed 15 beds''.
(b) Elimination of the Isolation Test for Cost-Based CAH
Ambulance Services.--
(1) In general.--Section 1834(l)(8) of the Social Security
Act (42 U.S.C. 1395m(l)(8)), as added by section 205(a) of
the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (114 Stat. 2763A-482), as enacted into
law by section 1(a)(6) of Public Law 106-554 (114 Stat.
2763), is amended by striking the comma at the end of
subparagraph (B) and all that follows and inserting a period.
(2) Technical correction.--Section 1834(l) of the Social
Security Act (42 U.S.C. 1395m(l)) is amended by redesignating
paragraph (8), as added by section 221(a) of the Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (114 Stat. 2763A-486), as enacted into law by section
1(a)(6) of Public Law 106-554 (114 Stat. 2763), as paragraph
(9).
(c) Coverage of Costs for Certain Emergency Room On-Call
Providers.--
(1) In general.--Section 1834(g)(5) of the Social Security
Act (42 U.S.C. 1395m(g)(5)) is amended--
(A) in the heading--
(i) by inserting ``certain'' before ``emergency''; and
(ii) by striking ``physicians'' and inserting
``providers'';
(B) by striking ``emergency room physicians who are on-call
(as defined by the Secretary)'' and inserting ``physicians,
physician assistants, nurse practitioners, and clinical nurse
specialists who are on-call (as defined by the Secretary) to
provide emergency services''; and
(C) by striking ``physicians' services'' and inserting
``services covered under this title''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply with respect to costs incurred for services
provided on or after January 1, 2004.
(d) Authorization of Periodic Interim Payment (PIP).--
(1) In general.--Section 1815(e)(2) of the Social Security
Act (42 U.S.C. 1395g(e)(2)) is amended--
(A) in subparagraph (C), by striking ``and'' after the
semicolon at the end;
(B) in subparagraph (D), by adding ``and'' after the
semicolon at the end; and
(C) by inserting after subparagraph (D) the following new
subparagraph:
``(E) inpatient critical access hospital services,''.
(2) Effective date.--The amendments made by paragraph (1)
shall apply with respect to payments for inpatient critical
access hospital services furnished on or after January 1,
2004.
(e) Exclusion of New CAHs From PPS Hospital Wage Index
Calculation.--Section 1886(d)(3)(E)(i) of the Social Security
Act (42 U.S.C. 1395ww(d)(3)(E)(i)), as amended by section
534, is amended by inserting after the first sentence the
following new sentence: ``In calculating the hospital wage
levels under the preceding sentence applicable with respect
to cost reporting periods beginning on or after January 1,
2004, the Secretary shall exclude the wage levels of any
hospital that became a critical access hospital prior to the
cost reporting period for which such hospital wage levels are
calculated.''.
SEC. 537. TEMPORARY INCREASE FOR HOME HEALTH SERVICES
FURNISHED IN A RURAL AREA.
(a) In General.--In the case of home health services
furnished in a rural area (as defined in section
1886(d)(2)(D) of the Social Security Act (42 U.S.C.
1395ww(d)(2)(D))) on or after October 1, 2003, and before
October 1, 2005, the Secretary of Health and Human Services
shall increase the payment amount otherwise made under
section 1895 of such Act (42 U.S.C. 1395fff ) for such
services by 10 percent.
(b) Waiving Budget Neutrality.--The Secretary of Health and
Human Services shall not reduce the standard prospective
payment amount (or amounts) under section 1895 of the Social
Security Act (42 U.S.C. 1395fff ) applicable to home health
services furnished during a period to offset the increase in
payments resulting from the application of subsection (a).
(c) No Effect on Subsequent Periods.--The payment increase
provided under subsection (a) for a period under such
subsection, shall not apply to episodes and visits ending
after such period, and shall not be taken into account in
calculating the payment amounts applicable for episodes and
visits occurring after such period.
SEC. 538. TEMPORARY INCREASE IN PAYMENTS FOR CERTAIN SERVICES
FURNISHED BY SMALL RURAL HOSPITALS UNDER
MEDICARE PROSPECTIVE PAYMENT SYSTEM FOR
HOSPITAL OUTPATIENT DEPARTMENT SERVICES.
(a) Increase.--
(1) In general.--In the case of an applicable covered OPD
service (as defined in paragraph (2)) that is furnished by a
hospital described in paragraph (7)(D)(i) of section 1833(t)
of the Social Security Act (42 U.S.C. 1395l(t)) on or after
January 1, 2004, and before January 1, 2007, the Secretary of
Health and Human Services (in this section referred to as the
``Secretary'') shall increase the medicare OPD fee schedule
amount (as determined under paragraph (4)(A) of such section)
that is applicable for such service in that year (determined
without regard to any increase under this section in a
previous year) by 5 percent.
(2) Applicable covered opd services defined.--For purposes
of this section, the term ``applicable covered OPD service''
means a covered clinic or emergency room visit that is
classified within the groups of covered OPD services (as
defined in paragraph (1)(B) of section 1833(t) of the Social
Security Act (42 U.S.C. 1395l(t))) established under
paragraph (2)(B) of such section.
(b) No Effect on Copayment Amount.--The Secretary shall
compute the copayment amount for applicable covered OPD
services under section 1833(t)(8)(A) of the Social Security
Act (42 U.S.C. 1395l(t)(8)(A)) as if this section had not
been enacted.
(c) No Effect on Increase Under Hold Harmless or Outlier
Provisions.--The Secretary shall apply the temporary hold
harmless provision under paragraph (7)(D)(i) of section
1833(t) of the Social Security Act (42 U.S.C. 1395l(t)) and
the outlier provision under paragraph (5) of such section as
if this section had not been enacted.
(d) Waiving Budget Neutrality and No Revision or
Adjustments.--The Secretary shall not make any revision or
adjustment under subparagraph (A), (B), or (C) of section
1833(t)(9) of the Social Security Act (42 U.S.C. 1395l(t)(9))
because of the application of subsection (a)(1).
(e) No Effect on Payments After Increase Period Ends.--The
Secretary shall not take into account any payment increase
provided under subsection (a)(1) in determining payments for
covered OPD services
[[Page S6328]]
(as defined in paragraph (1)(B) of section 1833(t) of the
Social Security Act (42 U.S.C. 1395l(t))) under such section
that are furnished after January 1, 2007.
(f) Findings.--The Senate finds the following:
(1) The medicare program has a responsibility to pay enough
for beneficial new technologies in order to ensure that
medicare beneficiaries have access to care; however, such
program must also be a prudent purchaser of health care items
and services.
(2) The 2003 Medicare Hospital Outpatient Prospective
Payment System Regulation may have resulted in limiting
beneficiary access to care.
(3) A methodology should be developed under the medicare
outpatient prospective payment system under section 1833(t)
of the Social Security Act (42 U.S.C. 1395l(t)) with
appropriate resources and such methodology should be
implemented January 1, 2004. This will ensure that all
hospitals are appropriately reimbursed for the drugs and
biologics that are used in the outpatient setting which in
turn will ensure patient access to new technologies.
(g) Technical Amendment.--Section 1833(t)(2)(B) (42 U.S.C.
1395l(t)(2)(B)) is amended by inserting ``(and periodically
revise such groups pursuant to paragraph (9)(A))'' after
``establish groups''.
SEC. 539. TEMPORARY INCREASE FOR GROUND AMBULANCE SERVICES
FURNISHED IN A RURAL AREA.
Section 1834(l) of the Social Security Act (42 U.S.C.
1395m(l)), as amended by section 536(b)(2), is amended by
adding at the end the following new paragraph:
``(10) Temporary increase for ground ambulance services
furnished in a rural area.--
``(A) In general.--Notwithstanding any other provision of
this subsection, in the case of ground ambulance services
furnished on or after January 1, 2004, and before January 1,
2007, for which the transportation originates in a rural area
described in paragraph (9) or in a rural census tract
described in such paragraph, the fee schedule established
under this section shall provide that the rate for the
service otherwise established, after application of any
increase under such paragraph, shall be increased by 5
percent.
``(B) Application of increased payments after 2006.--The
increased payments under subparagraph (A) shall not be taken
into account in calculating payments for services furnished
on or after the period specified in such subparagraph.''.
SEC. 540. EXCLUSION OF CERTAIN RURAL HEALTH CLINIC AND
FEDERALLY QUALIFIED HEALTH CENTER SERVICES FROM
THE MEDICARE PPS FOR SKILLED NURSING
FACILITIES.
(a) In General.--Section 1888(e) of the Social Security Act
(42 U.S.C. 1395yy(e)) is amended--
(1) in paragraph (2)(A)(i)(II), by striking ``clauses (ii)
and (iii)'' and inserting ``clauses (ii), (iii), and (iv)'';
and
(2) by adding at the end of paragraph (2)(A) the following
new clause:
``(iv) Exclusion of certain rural health clinic and
federally qualified health center services.--Services
described in this clause are--
``(I) rural health clinic services (as defined in paragraph
(1) of section 1861(aa)); and
``(II) Federally qualified health center services (as
defined in paragraph (3) of such section);
that would be described in clause (ii) if such services were
furnished by a physician or practitioner not affiliated with
a rural health clinic or a Federally qualified health
center.''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to services furnished on or after January 1,
2004.
SEC. 541. MEDICARE INCENTIVE PAYMENT PROGRAM IMPROVEMENTS.
(a) Procedures for Secretary, and Not Physicians, To
Determine When Bonus Payments Under Medicare Incentive
Payment Program Should Be Made.--Section 1833(m) of the
Social Security Act (42 U.S.C. 1395l(m)) is amended--
(1) by inserting ``(1)'' after ``(m)''; and
(2) by adding at the end the following new paragraph:
``(2) The Secretary shall establish procedures under which
the Secretary, and not the physician furnishing the service,
is responsible for determining when a payment is required to
be made under paragraph (1).''.
(b) Educational Program Regarding the Medicare Incentive
Payment Program.--The Secretary shall establish and implement
an ongoing educational program to provide education to
physicians under the medicare program on the medicare
incentive payment program under section 1833(m) of the Social
Security Act (42 U.S.C. 1395l(m)).
(c) Ongoing Study and Annual Report on the Medicare
Incentive Payment Program.--
(1) Ongoing study.--The Secretary shall conduct an ongoing
study on the medicare incentive payment program under section
1833(m) of the Social Security Act (42 U.S.C. 1395l(m)). Such
study shall focus on whether such program increases the
access of medicare beneficiaries who reside in an area that
is designated (under section 332(a)(1)(A) of the Public
Health Service Act (42 U.S.C. 254e(a)(1)(A))) as a health
professional shortage area to physicians' services under the
medicare program.
(2) Annual reports.--Not later than 1 year after the date
of enactment of this Act, and annually thereafter, the
Secretary shall submit to Congress a report on the study
conducted under paragraph (1), together with recommendations
for such legislation and administrative action as the
Secretary considers appropriate.
SEC. 542. TWO-YEAR TREATMENT OF CERTAIN CLINICAL DIAGNOSTIC
LABORATORY TESTS FURNISHED BY A SOLE COMMUNITY
HOSPITAL.
Notwithstanding subsections (a)(1)(D) and (h) of section
1833 of the Social Security Act (42 U.S.C. 1395l) and section
1834(d)(1) of such Act (42 U.S.C. 1395m(d)(1)), in the case
of a clinical diagnostic laboratory test covered under part B
of title XVIII of such Act that is furnished in 2004 or 2005
by a sole community hospital (as defined in section
1886(d)(5)(D)(iii) of such Act (42 U.S.C.
1395ww(d)(5)(D)(iii))) as part of services provided to
patients of the hospital, the following rules shall apply:
(1) Payment based on reasonable costs.--The amount of
payment for such test shall be 100 percent of the reasonable
costs of the hospital in furnishing such test.
(2) No beneficiary cost-sharing.--No coinsurance,
deductible, copayment, or other cost-sharing otherwise
applicable under such part B shall apply with respect to such
test.
SEC. 543. ESTABLISHMENT OF FLOOR ON GEOGRAPHIC ADJUSTMENTS OF
PAYMENTS FOR PHYSICIANS' SERVICES.
Section 1848(e)(1) of the Social Security Act (42 U.S.C.
1395w-4(e)(1)) is amended--
(1) in subparagraph (A), by striking ``subparagraphs (B)
and (C)'' and inserting ``subparagraphs (B), (C), and (E)'';
and
(2) by adding at the end the following new subparagraph:
``(E) Floor for practice expense, malpractice, and work
geographic indices.--For purposes of payment for services
furnished on or after January 1, 2004, after calculating the
practice expense, malpractice, and work geographic indices in
clauses (i), (ii), and (iii) of subparagraph (A) and in
subparagraph (B), the Secretary shall increase any such index
to 1.00 for any locality for which such index is less than
1.00.''.
SEC. 544. FREEZE IN PAYMENTS FOR ITEMS OF DURABLE MEDICAL
EQUIPMENT AND ORTHOTICS AND PROSTHETICS.
(a) DME.--Section 1834(a)(14) of the Social Security Act
(42 U.S.C. 1395m(a)(14)) is amended--
(1) in subparagraph (E), by striking ``and'' at the end;
(2) in subparagraph (F)--
(A) by striking ``a subsequent year'' and inserting
``2003''; and
(B) by striking ``the previous year.'' and inserting
``2002;''; and
(3) by adding at the end the following new subparagraphs:
``(G) for each of the years 2004 through 2013, 0 percentage
points; and
``(H) for a subsequent year, the percentage increase in the
consumer price index for all urban consumers (U.S. urban
average) for the 12-month period ending with June of the
previous year.''.
(b) Orthotics and Prosthetics.--Section 1834(h)(4)(A) of
the Social Security Act (42 U.S.C. 1395m(h)(4)(A)) is
amended--
(1) in clause (vii), by striking ``and'' at the end;
(2) in clause (viii)--
(A) by striking ``a subsequent year'' and inserting
``2003''; and
(B) by striking ``the previous year'' and inserting
``2002''; and
(3) by adding at the end the following new clauses:
``(ix) for each of the years 2004 through 2013, 0 percent;
and
``(x) for a subsequent year, the percentage increase in the
consumer price index for all urban consumers (U.S. urban
average) for the 12-month period ending with June of the
previous year;''.
SEC. 545. APPLICATION OF COINSURANCE AND DEDUCTIBLE FOR
CLINICAL DIAGNOSTIC LABORATORY TESTS.
(a) Coinsurance.--
(1) In general.--Section 1833(a) of the Social Security Act
(42 U.S.C. 1395l(a)) is amended--
(A) in paragraph (1)(D)--
(i) in clause (i), by striking ``(or 100 percent, in the
case of such tests for which payment is made on an
assignment-related basis)''; and
(ii) in clause (ii), by striking ``100 percent'' and
inserting ``80 percent''; and
(B) in paragraph (2)(D)--
(i) in clause (i), by striking ``(or 100 percent, in the
case of such tests for which payment is made on an
assignment-related basis or to a provider having an agreement
under section 1866)''; and
(ii) in clause (ii), by striking ``100 percent'' and
inserting ``80 percent''.
(2) Conforming amendment.--The third sentence of section
1866(a)(2)(A) of the Social Security Act (42 U.S.C.
1395cc(a)(2)(A) is amended by striking ``and with respect to
clinical diagnostic laboratory tests for which payment is
made under part B''.
(b) Deductible.--Section 1833(b) of the Social Security Act
(42 U.S.C. 1395l(b)) is amended--
(1) by striking paragraph (3); and
(2) by redesignating paragraphs (4), (5), and (6) as
paragraphs (3), (4), and (5), respectively.
(c) Effective Date.--The amendments made by this section
shall apply to tests furnished on or after January 1, 2004.
SEC. 546. REVISION IN PAYMENTS FOR COVERED OUTPATIENT DRUGS.
Section 1842(o)(1) of the Social Security Act (42 U.S.C.
1395u(o)(1)) is amended by
[[Page S6329]]
striking ``equal to 95 percent of the average wholesale
price.'' and inserting ``equal to--
``(A) in the case of drugs furnished prior to January 1,
2004, 95 percent of the average wholesale price; and
``(B) in the case of drugs furnished on or after January 1,
2004, the lesser of--
``(i) 85 percent of the average wholesale price; or
``(ii) the amount payable for the drug or biological during
the last quarter of the previous year (as determined under
this subparagraph, or, in the case of 2004, under
subparagraph (A) using the second quarter of 2003) increased
by the percentage increase in the consumer price index for
all urban consumers (U.S. urban average) for the 12-month
period ending with June of the previous year.''.
SEC. 547. INAPPLICABILITY OF SUNSET.
The provisions of section 601(a) of this Act shall not
apply to the provisions of, and amendments made by, this
subtitle.
______
SA 595. Mr. HARKIN proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. FAIR REIMBURSEMENT FOR RURAL HEALTH CARE PROVIDERS
UNDER MEDICARE.
(a) Reduction of Geographic Disparity Under Medicare.--
(1) In general.--Subject to paragraph (3), the Secretary of
Health and Human Services shall promulgate the regulations
described in paragraph (2) by December 31, 2004 (unless
legislation has been enacted having the effect of such
regulations before the conclusion of the first session of the
108th Congress).
(2) Regulations described.--The regulations described in
this paragraph are regulations that reduce the geographic
disparity in payments under the medicare program under title
XVIII of the Social Security Act (42 U.S.C. 1395 et seq.) to
health care providers by--
(A) equalizing urban and rural standardized payment amounts
under the medicare inpatient hospital prospective payment
system under section 1886(d)(3) of such Act (42 U.S.C.
1395ww(d)(3));
(B) improving the medicare incentive payment program under
section 1833(m) of such Act (42 U.S.C. 1395l(m)) to ensure
that bonus payments under such section are made on behalf of
all eligible physicians;
(C) providing fairness in the medicare disproportionate
share hospitals adjustment for rural hospitals under section
1886(d)(5)(F) of such Act (42 U.S.C. 1395ww(d)(5)(F));
(D) establishing a medicare inpatient hospital bonus
payment for low-volume hospitals under section 1886(d) of
such Act (42 U.S.C. 1395ww(d));
(E) adjusting the medicare inpatient hospital prospective
payment system wage index to revise the labor-related share
of such index to account for 62 percent of such index under
section 1886(d)(3)(E) of such Act (42 U.S.C.
1395ww(d)(3)(E));
(F) revising the physician fee schedule wage index under
section 1848(e)(1) of such Act (42 U.S.C. 1395w-4(e)(1)) to
establish a minimum geographic cost-of-practice index value
of not less than 1 for physicians' services furnished under
the medicare program;
(G) extending the temporary increase under section 508(a)
of the Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000 (114 Stat. 2763A-533), as enacted into
law by section 1(a)(6) of Public Law 106-554, for home health
services furnished in a rural area; and
(H) making any other change to a payment system under the
medicare program that the Secretary determines is
appropriate.
(3) Hold-harmless.--The regulations promulgated under
paragraph (1) may not result in a lower level of
reimbursement for a health care provider under the medicare
program under title XVIII of the Social Security Act than
such provider would have received but for the enactment of
this section.
(b) Funding.--
(1) Appropriation.--There are appropriated, out of moneys
in the Treasury not otherwise appropriated, $50,000,000,000
for the purpose of implementing the regulations described in
subsection (a)(2).
(2) Reversion of excess funds.--Any funds appropriated
under this subsection that are not used to implement such
regulations shall revert to the Treasury and shall be used to
reduce the Federal deficit.
(c) Funding offset.--Paragraph (2) of section 116(a)
(relating to partial exclusion of dividends received by
individuals), as added by section 201(a), is amended to read
as follows:
``(2) Limitation.--Paragraph (1) shall apply to qualified
dividend income of a taxpayer only to the extent such income
does not exceed the sum of $500 ($250 in the case of a
married individual filing a separate return).''.
______
SA 596. Ms. COLLINS (for herself, Mr. Rockefeller, Mr. Nelson of
Nebraska, Mr. Smith, Mr. Schumer, Mr. Coleman, Mrs. Clinton, Mrs.
Murray, and Mr. Wyden) proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
Strike section 371 and insert the following:
SEC. 371. TEMPORARY STATE AND LOCAL FISCAL RELIEF.
(a) $10,000,000,000 for a Temporary Increase of the
Medicaid FMAP.--
(1) Permitting maintenance of fiscal year 2002 fmap for
last 2 calendar quarters of fiscal year 2003.--Subject to
paragraph (5), if the FMAP determined without regard to this
subsection for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this subsection.
(2) Permitting maintenance of fiscal year 2003 fmap for
first 3 quarters of fiscal year 2004.--Subject to paragraph
(5), if the FMAP determined without regard to this subsection
for a State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP
for the first, second, and third calendar quarters of fiscal
year 2004, before the application of this subsection.
(3) General 2.95 percentage points increase for last 2
calendar quarters of fiscal year 2003 and first 3 calendar
quarters of fiscal year 2004.--Subject to paragraphs (5),
(6), and (7), for each State for the third and fourth
calendar quarters of fiscal year 2003 and for the first,
second, and third calendar quarters of fiscal year 2004, the
FMAP (taking into account the application of paragraphs (1)
and (2)) shall be increased by 2.95 percentage points.
(4) Increase in cap on medicaid payments to territories.--
Subject to paragraphs (6) and (7), with respect to the third
and fourth calendar quarters of fiscal year 2003 and the
first, second, and third calendar quarters of fiscal year
2004, the amounts otherwise determined for Puerto Rico, the
Virgin Islands, Guam, the Northern Mariana Islands, and
American Samoa under subsections (f) and (g) of section 1108
of the Social Security Act (42 U.S.C. 1308) shall each be
increased by an amount equal to 5.90 percent of such amounts.
(5) Scope of application.--The increases in the FMAP for a
State under this subsection shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(A) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4);
(B) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.); or
(C) any payments under XIX of such Act that are based on
the enhanced FMAP described in section 2105(b) of such Act
(42 U.S.C. 1397ee(b)).
(6) State eligibility.--
(A) In general.--Subject to subparagraph (B), a State is
eligible for an increase in its FMAP under paragraph (3) or
an increase in a cap amount under paragraph (4) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(B) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, is eligible for an increase
in its FMAP under paragraph (3) or an increase in a cap
amount under paragraph (4) in the first calendar quarter (and
subsequent calendar quarters) in which the State has
reinstated eligibility that is no more restrictive than the
eligibility under such plan (or waiver) as in effect on
September 2, 2003.
(C) Rule of construction.--Nothing in subparagraph (A) or
(B) shall be construed as affecting a State's flexibility
with respect to benefits offered under the State medicaid
program under title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) (including any waiver under such title or under
section 1115 of such Act (42 U.S.C. 1315)).
(7) Requirement for certain states.--In the case of a State
that requires political subdivisions within the State to
contribute toward the non-Federal share of expenditures under
the State medicaid plan required under section 1902(a)(2) of
the Social Security Act (42 U.S.C. 1396a(a)(2)), the State
shall not require that such political subdivisions pay a
greater percentage of the non-Federal share of such
expenditures for the third and fourth calendar quarters of
fiscal year 2003 and the first, second and third calendar
quarters of fiscal year 2004, than the percentage that was
required by the State under such plan on April 1, 2003, prior
to application of this subsection.
(8) Definitions.--In this subsection:
(A) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(B) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(9) Repeal.--Effective as of October 1, 2004, this
subsection is repealed.
(b) $10,000,000,000 for Assistance in Providing Government
Services.--
[[Page S6330]]
(1) Establishment.--
(A) In general.--Not later than 45 days after the date of
enactment of this Act, the Secretary shall establish a
program under which the Secretary shall make a payment to
each State in accordance with paragraph (2) and each unit of
general local government which qualifies for a payment under
paragraph (3).
(B) Requirement.--In making payments under this subsection,
the Secretary shall ensure that not more than 72.70 percent
of the amount appropriated under subparagraph (C) is paid in
fiscal year 2003.
(C) Appropriation.--There is authorized to be appropriated
and is appropriated for making payments under this
subsection, $10,000,000,000. Amounts appropriated under this
subparagraph shall remain available for expenditure through
September 30, 2004.
(2) $6,000,000,000 paid to states.--
(A) Amount of payment.--
(i) Based on population.--Subject to clause (ii),
$6,000,000,000 of the amount appropriated under paragraph
(1)(C) shall be used to pay each State an amount equal to the
relative population proportion amount described in clause
(iii).
(ii) Minimum payment.--
(I) In general.--No State shall receive a payment under
this paragraph that is less than--
(aa) in the case of any of the several States or the
District of Columbia, $30,000,000; and
(bb) in the case of the Commonwealth of Puerto Rico, the
United States Virgin Islands, Guam, the Commonwealth of the
Northern Mariana Islands, or American Samoa, $6,000,000.
(II) Pro rata adjustments.--The Secretary shall adjust on a
pro rata basis the amount of the payments to States
determined under this subparagraph to the extent necessary to
comply with the requirements of subclause (I).
(iii) Relative population proportion amount.--The relative
population proportion amount described in this clause is the
product of--
(I) $6,000,000,000; and
(II) the relative State population proportion (defined in
clause (iv)).
(iv) Relative state population proportion defined.--For
purposes of clause (iii)(II), the term ``relative State
population proportion'' means, with respect to a State, the
amount equal to the quotient of--
(I) the population of the State (as reported in the most
recent decennial census); and
(II) the total population of all States (as reported in the
most recent decennial census).
(B) Use of payment.--
(i) In general.--Subject to clause (ii), a State shall use
the funds provided under a payment made under this paragraph
to fund 1 or more of the following activities:
(I) Education or job training.
(II) Health care or other social services.
(III) Transportation or other infrastructure.
(IV) Law enforcement or public safety.
(V) Essential government services.
(ii) Limitation.--A State may only use funds provided under
a payment made under this paragraph for types of expenditures
permitted under the most recently approved budget for the
State.
(C) Certification.--In order to receive a payment under
this paragraph for a fiscal year, the State shall provide the
Secretary with a certification that the State's proposed uses
of the funds are consistent with subparagraph (B).
(3) $4,000,000,000 paid to units of general local
government.--
(A) Eligibility.--The Secretary shall, by regulation,
establish procedures under which units of general local
government may qualify for the payments provided under this
paragraph. Such procedures shall include a requirement that
no unit of general local government shall be eligible for a
payment under this paragraph unless the unit provides the
Secretary with a certification that the unit's proposed uses
of the funds are consistent with subparagraph (C).
(B) Amount of payment.--
(i) In general.--Subject to clause (ii), the Secretary
shall pay each unit of general local government that
qualifies for a payment under the regulation required under
subparagraph (A), an amount equal to the same ratio to
$4,000,000,000 as the population of such unit of general
local government (as reported in the most recent decennial
census) bears to the total population of all such units that
qualify for a payment under this paragraph (as so reported).
(ii) Adjustments.--The Secretary may adjust the amount of
the payment otherwise determined for a unit of general local
government under this subparagraph to the extent the
Secretary determines necessary to ensure that all such units
that would qualify for a payment under this paragraph receive
a payment.
(C) Use of payment.--
(i) In general.--Subject to clause (ii), a unit of general
local government shall use the funds provided under a payment
made under this paragraph to fund 1 or more of the following
activities:
(I) Education or job training.
(II) Health care or other social services.
(III) Transportation or other infrastructure.
(IV) Law enforcement or public safety.
(V) Essential government services.
(ii) Limitation.--A unit of general local government may
only use funds provided under a payment made under this
paragraph for types of expenditures permitted under the most
recently approved budget for the unit.
(4) Definitions.--In this subsection:
(A) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(B) State.--The term ``State'' means the 50 States, the
District of Columbia, the Commonwealth of Puerto Rico, the
United States Virgin Islands, Guam, the Commonwealth of the
Northern Mariana Islands, and American Samoa.
(C) Unit of general local government.--
(i) In general.--The term ``unit of general local
government'' means--
(I) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(II) the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(ii) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
subsection, the rules under section 6720(c) of title 31,
United States Code, shall apply.
(5) Repeal.--Effective as of October 1, 2004, this
subsection is repealed.
______
SA 597. Mrs. CLINTON submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. . REPEAL OF ALTERNATIVE MINIMUM TAX SPECIAL DEDUCTION
ADJUSTMENT FOR CERTAIN TAX-EXEMPT
ORGANIZATIONS.
(a) In General.--Paragraph (3) of section 56(c) (relating
to special deduction for certain organizations not allowed)
is amended by striking ``The'' and inserting ``Other than for
an organization described in paragraph (3) or (4) of section
501(c), the''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after the date of the
enactment of this section.
______
SA 598. Mrs. CLINTON submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subpart C of title V, insert the following:
SEC. ____. LEAD ABATEMENT TAX CREDIT.
(a) Findings.--Congress finds that:
(1) Of the 98,000,000 housing units in the United States,
38,000,000 have lead-based paint.
(2) Of the 38,000,000 housing units with lead-based paint,
25,000,000 pose a hazard, as defined by Environmental
Protection Agency and Department of Housing and Urban
Development standards, due to conditions such as peeling
paint and settled dust on floors and windowsills that contain
lead at levels above Federal safety standards.
(3) Though the number of children in the United States ages
1 through 5 with blood levels higher than the Centers for
Disease Control action level of 10 micrograms per deciliter
has declined to 300,000, lead poisoning remains a serious,
entirely preventable threat to a child's intelligence,
behavior, and learning.
(4) The Secretary of Health and Human Services has
established a national goal of ending childhood lead
poisoning by 2010.
(5) Current Federal lead abatement programs, such as the
Lead Hazard Control Grant Program of the Department of
Housing and Urban Development, only have resources sufficient
to make approximately 7,000 homes lead-safe each year. In
many cases, when State and local public health departments
identify a lead-poisoned child, resources are insufficient to
reduce or eliminate the hazards.
(6) Approximately 15 percent of children are lead-poisoned
by home renovation projects performed by remodelers who fail
to follow basic safeguards to control lead dust.
(7) Old windows typically pose significant risks because
wood trim is more likely to be painted with lead-based paint,
moisture causes paint to deteriorate, and friction generates
lead dust. The replacement of old windows that contain lead
based paint significantly reduces lead poisoning hazards in
addition to producing significant energy savings.
(b) Purpose.--The purpose of this section is to encourage
the safe removal of lead hazards from homes and thereby
decrease the number of children who suffer reduced
intelligence, learning difficulties, behavioral problems, and
other health consequences due to lead-poisoning.
(c) Lead Abatement Tax Credit.--
(1) In General.--Subpart B of part IV of subchapter A of
chapter 1 (relating to foreign tax credit, etc.) is amended
by adding at the end the following new section:
``SEC. 30B. HOME LEAD ABATEMENT.
``(a) Allowance of Credit.--There shall be allowed as a
credit against the tax imposed by this chapter an amount
equal to 50 percent of the abatement cost paid or incurred
[[Page S6331]]
by the taxpayer during the taxable year for each eligible
dwelling unit of the taxpayer.
``(b) Limitation.--The amount of the credit allowed under
subsection (a) for any eligible dwelling unit shall not
exceed--
``(1) $1,500, over
``(2) the aggregate cost taken into account under
subsection (a) with respect to such unit for all preceding
taxable years.
``(c) Definitions and Special Rules.--For purposes of this
section:
``(1) Abatement cost.--
``(A) In general.--The term `abatement cost' means, with
respect to any eligible dwelling unit--
``(i) the cost for a certified risk assessor to conduct an
assessment to determine the presence of a lead-based paint
hazard,
``(ii) the cost for a certified lead abatement supervisor
to perform the removal of paint and dust, the permanent
enclosure or encapsulation of lead-based paint, the
replacement of painted surfaces or fixtures, or the removal
or permanent covering of soil when lead-based paint hazards
are present in such paint, dust, or soil,
``(iii) the cost for a certified lead abatement supervisor
to perform all preparation, cleanup, disposal, and
postabatement clearance testing activities associated with
the activities described in clause (ii), and
``(iv) costs incurred by or on behalf of any occupant of
such dwelling unit for any relocation which is necessary to
achieve occupant protection (as defined under section 1345 of
title 24, Code of Federal Regulations).
``(B) Limitation.--The term `abatement cost' does not
include any cost to the extent such cost is funded by any
grant, contract, or otherwise by another person (or any
governmental agency).
``(2) Eligible dwelling unit.--
``(A) In general.--The term `eligible dwelling unit' means
any dwelling unit--
``(i) placed in service before 1978,
``(ii) located in the United States, and
``(iii) determined by a certified risk assessor to have a
lead-based paint hazard.
``(B) Dwelling unit.--The term `dwelling unit' has the
meaning given such term by section 280A(f)(1).
``(3) Lead-based paint hazard.--The term `lead-based paint
hazard' has the meaning given such term under part 745 of
title 40, Code of Federal Regulations.
``(4) Certified lead abatement supervisor.--The term
`certified lead abatement supervisor' means an individual
certified by the Environmental Protection Agency pursuant to
section 745.226 of title 40, Code of Federal Regulations, or
an appropriate State agency pursuant to section 745.325 of
title 40, Code of Federal Regulations.
``(5) Certified inspector.--The term `certified inspector'
means an inspector certified by the Environmental Protection
Agency pursuant to section 745.226 of title 40, Code of
Federal Regulations, or an appropriate State agency pursuant
to section 745.325 of title 40, Code of Federal Regulations.
``(6) Certified risk assessor.--The term `certified risk
assessor' means a risk assessor certified by the
Environmental Protection Agency pursuant to section 745.226
of title 40, Code of Federal Regulations, or an appropriate
State agency pursuant to section 745.325 of title 40, Code of
Federal Regulations.
``(7) Documentation required for credit allowance.--No
credit shall be allowed under subsection (a) with respect to
any eligible dwelling unit unless--
``(A) after lead abatement is complete, a certified
inspector or certified risk assessor provides written
documentation to the taxpayer that includes--
``(i) a certification that the postabatement procedures (as
defined by section 745.227 of title 40, Code of Federal
Regulations) have been performed and that the unit does not
contain lead dust hazards (as defined by section
745.227(e)(8)(viii) of title 40, Code of Federal
Regulations), and
``(ii) documentation showing that the lead abatement meets
the requirements of this section, and
``(B) the taxpayer files with the appropriate State
agency--
``(i) the documentation described in subparagraph (A),
``(ii) a receipt from the certified risk assessor
documenting the costs of determining the presence of a lead-
based paint hazard,
``(iii) a receipt from the certified lead abatement
supervisor documenting the abatement cost (other than the
costs described in paragraph (1)(A)(i)), and
``(iv) a statement indicating the age of the dwelling unit.
``(8) Basis reduction.--The basis of any property for which
a credit is allowable under subsection (a) shall be reduced
by the amount of such credit (determined without regard to
subsection (d)).
``(d) Limitation based on amount of tax.--The credit
allowed under subsection (a) for the taxable year shall not
exceed the excess of--
``(1) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(2) the sum of the credits allowable under subpart A and
sections 27, 29, 30, and 30A for the taxable year.
``(e) Carryforward Allowed.--
``(1) In general.--If the credit amount allowable under
subsection (a) for a taxable year exceeds the amount of the
limitation under subsection (d) for such taxable year
(referred to as the `unused credit year' in this subsection),
such excess shall be allowed as a credit carryforward for
each of the 20 taxable years following the unused credit
year.
``(2) Rules.--Rules similar to the rules of section 39
shall apply with respect to the credit carryforward under
paragraph (1).''.
(2) Conforming amendments.--
(A) Section 1016(a) is amended by striking ``and'' in
paragraph (27), by striking the period and inserting ``,
and'' in paragraph (28), and by inserting at the end the
following new paragraph:
``(29) in the case of an eligible dwelling unit with
respect to which a credit for lead abatement was allowed
under section 30B, to the extent provided in section
30B(c)(8).''.
(B) The table of sections for subpart B of part IV of
subchapter A of chapter 1 is amended by inserting after the
item relating to section 30A the following new item:
``Sec. 30B. Home lead abatement.''.
(3) Effective date.--The amendments made by this section
shall apply to abatement costs incurred after December 31,
2003, in taxable years ending after that date.
______
SA 599. Mrs. CLINTON submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end, add the following:
TITLE ____--MEDICARE AND MEDICAID PROVISIONS
SEC. ____00. SHORT TITLE; AMENDMENTS TO SOCIAL SECURITY ACT;
REFERENCES TO BIPA; TABLE OF CONTENTS.
(a) Short Title.--This title may be cited as the ``Health
Care Improvement Act of 2003''.
(b) Amendments to Social Security Act.--Except as otherwise
specifically provided, whenever in this title an amendment is
expressed in terms of an amendment to or repeal of a section
or other provision, the reference shall be considered to be
made to that section or other provision of the Social
Security Act.
(c) BIPA.--In this title, the term ``BIPA'' means the
Medicare, Medicaid, and SCHIP Benefits Improvement and
Protection Act of 2000, as enacted into law by section
1(a)(6) of Public Law 106-554.
(d) Table of Contents.--The table of contents of this title
is as follows:
TITLE ____--MEDICARE AND MEDICAID PROVISIONS
Sec. ____00. Short title; amendments to Social Security Act; references
to BIPA; table of contents.
Subtitle A--Medicare Provisions
Sec. ____01. Revision of acute care hospital payment updates.
Sec. ____02. Extension of level of adjustment for Indirect Costs of
Medical Education (IME).
Sec. ____03. Hospital outpatient department outlier payments.
Sec. ____04. Hospital outpatient department transitional payments.
Sec. ____05. Application of rules for determining provider-based status
for certain entities.
Sec. ____06. Extension of treatment of certain physician pathology
services.
Sec. ____07. Extension of the authorization for appropriations for
Medicare Rural Grant Program.
Sec. ____08. Extension of enhanced payments for psychiatric hospitals.
Sec. ____09. Additional delay in application of 15 percent reduction on
payment limits for home health services.
Sec. ____10. Extension of temporary increase for home health services
furnished in a rural area.
Sec. ____11. Extension of temporary increase in adjusted Federal per
diem rate under PPS for skilled nursing facilities.
Sec. ____12. Extension of increase in nursing component of PPS Federal
rate under PPS for skilled nursing facilities.
Sec. ____13. Increase in renal dialysis composite rate for services
furnished in 2003.
Sec. ____14. Extension of the authorization for appropriations for
vaccines outreach expansion.
Sec. ____15. Extension of moratorium on therapy caps.
Sec. ____16. Increase in the conversion factor for payments under the
medicare physician fee schedule.
Sec. ____17. Revision of Medicare+Choice minimum percentage increase.
Subtitle B--Medicaid Provisions
Sec. ____21. Extension of medicare cost-sharing for part B premium for
certain additional low-income medicare beneficiaries.
Sec. ____22. Medicaid DSH allotments.
Subtitle C--Application and Budget Scorekeeping
Sec. ____31. Application of provisions of title.
Subtitle A--Medicare Provisions
SEC. ____01. REVISION OF ACUTE CARE HOSPITAL PAYMENT UPDATES.
Subclause (XVIII) of section 1886(b)(3)(B)(i) (42 U.S.C.
1395ww(b)(3)(B)(i)) is amended by striking ``minus 0.55
percentage points''.
SEC. ____02. EXTENSION OF LEVEL OF ADJUSTMENT FOR INDIRECT
COSTS OF MEDICAL EDUCATION (IME).
(a) In General.--Section 1886(d)(5)(B)(ii) (42 U.S.C.
1395ww(d)(5)(B)(ii)) is amended--
[[Page S6332]]
(1) in subclause (VI) by inserting ``and fiscal year 2003''
after ``2002''; and
(2) in subclause (VII), by striking ``2002'' and inserting
``2003''.
(b) Conforming Amendment Relating to Determination of
Standardized Amount.--Section 1886(d)(2)(C)(i) (42 U.S.C.
1395ww(d)(2)(C)(i)) is amended--
(1) by striking ``1999 or'' and inserting ``1999,''; and
(2) by inserting ``, or of section ____02 of the Health
Care Improvement Act of 2003'' after ``2000''.
SEC. ____03. HOSPITAL OUTPATIENT DEPARTMENT OUTLIER PAYMENTS.
(a) In General.--Section 1833(t)(5) (42 U.S.C. 1395l(t)(5))
is amended--
(1) in subparagraph (C)--
(A) in clause (i), by striking ``exceed the applicable''
and inserting ``exceed a percentage specified by the
Secretary that is not less than the applicable minimum
percentage or greater than the applicable maximum''; and
(B) by striking clause (ii) and inserting the following new
clause:
``(ii) Applicable percentages.--For purposes of clause
(i)--
``(I) the term `applicable minimum percentage' for a year
means zero percent for years before 2003 and 2.0 percent for
years after 2002; and
``(II) the term `applicable maximum percentage' for a year
means 2.5 percent for years before 2003 and 3.0 percent for
years after 2002.''; and
(2) in subparagraph (D)--
(A) in the heading, by striking ``Transitional authority''
and inserting ``Flexibility''; and
(B) in the matter preceding clause (i), by striking ``for
covered OPD services furnished before January 1, 2002,''.
SEC. ____04. HOSPITAL OUTPATIENT DEPARTMENT TRANSITIONAL
PAYMENTS.
Section 1833(t)(7) (42 U.S.C. 1395l(t)(7)) is amended--
(1) in subparagraph (B)--
(A) in the heading, by inserting ``and 2003'' after
``2002''; and
(B) by inserting ``and 2003'' after ``furnished during
2002'' in the matter preceding clause (i); and
(2) in subparagraph (C)--
(A) in the heading, by striking ``2003'' and inserting
``2004''; and
(B) by striking ``2003'' and inserting ``2004'' in the
matter preceding clause (i); and
(3) in subparagraph (D)(i), by striking ``2004'' and
inserting ``2005''.
SEC. ____05. APPLICATION OF RULES FOR DETERMINING PROVIDER-
BASED STATUS FOR CERTAIN ENTITIES.
Section 404 of BIPA (114 Stat. 2763A-506) is amended by
striking ``2002'' and inserting ``2003'' each place it
appears.
SEC. ____06. EXTENSION OF TREATMENT OF CERTAIN PHYSICIAN
PATHOLOGY SERVICES.
Section 542(c) of BIPA (114 Stat. 2763A-550) is amended by
striking ``2-year period'' and inserting ``3-year period''.
SEC. ____07. EXTENSION OF THE AUTHORIZATION FOR
APPROPRIATIONS FOR MEDICARE RURAL GRANT
PROGRAM.
Section 1820(j) (42 U.S.C. 1395i-4(j)) is amended by
striking ``2002'' and inserting ``2003''.
SEC. ____08. EXTENSION OF ENHANCED PAYMENTS FOR PSYCHIATRIC
HOSPITALS.
Section 1886(b)(2)(E)(i) (42 U.S.C. 1395ww(b)(2)(E)(i)) is
amended--
(1) in subclause (I), by striking ``and'' at the end;
(2) in subclause (II), by striking the period at the end
and inserting ``; and''; and
(3) by adding at the end the following new subclause:
``(III) only in the case of a hospital or unit described in
clause (ii)(I), for a cost reporting period beginning on or
after October 1, 2002, and before September 30, 2003, 2
percent.''.
SEC. ____09. ADDITIONAL DELAY IN APPLICATION OF 15 PERCENT
REDUCTION ON PAYMENT LIMITS FOR HOME HEALTH
SERVICES.
Section 1895(b)(3)(A)(i) (42 U.S.C. 1395fff(b)(3)(A)(i)) is
amended--
(1) by redesignating subclause (III) as subclause (IV);
(2) in subclause (IV), as redesignated, by striking
``described in subclause (II)'' and inserting ``described in
subclause (III)''; and
(3) by inserting after subclause (II) the following new
subclause:
``(III) For the 12-month period beginning after the period
described in subclause (II), such amount (or amounts) shall
be equal to the amount (or amounts) determined under
subclause (II), updated under subparagraph (B).''.
SEC. ____10. EXTENSION OF TEMPORARY INCREASE FOR HOME HEALTH
SERVICES FURNISHED IN A RURAL AREA.
(a) In General.--Section 508(a) BIPA (114 Stat. 2763A-533)
is amended--
(1) by striking ``24-Month Increase Beginning April 1,
2001'' and inserting ``In General''; and
(2) by striking ``April 1, 2003'' and inserting ``October
1, 2003''.
(b) Conforming Amendment.--Section 547(c)(2) of BIPA (114
Stat. 2763A-553) is amended by striking ``the period
beginning on April 1, 2001, and ending on September 30,
2002,'' and inserting ``a period under such section''.
SEC. ____11. EXTENSION OF TEMPORARY INCREASE IN ADJUSTED
FEDERAL PER DIEM RATE UNDER PPS FOR SKILLED
NURSING FACILITIES.
Section 101(d)(1) of the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (Appendix F, 113 Stat.
1501A-325), as enacted into law by section 1000(a)(6) of
Public Law 106-113, is amended--
(1) in the heading, by striking ``and 2002'' and inserting
``, 2002, and 2003''; and
(2) by striking ``and 2002'' and inserting ``, 2002, and
2003''.
SEC. ____12. EXTENSION OF INCREASE IN NURSING COMPONENT OF
PPS FEDERAL RATE UNDER PPS FOR SKILLED NURSING
FACILITIES.
Section 312(a) of BIPA (114 Stat. 2763A-498) is amended by
striking ``October 1, 2002'' and inserting ``October 1,
2003''.
SEC. ____13. INCREASE IN RENAL DIALYSIS COMPOSITE RATE FOR
SERVICES FURNISHED IN 2003.
Notwithstanding any other provision of law, with respect to
payment under part B of title XVIII of the Social Security
Act for renal dialysis services furnished in 2003, the
composite payment rate otherwise established under section
1881(b)(7) of such Act (42 U.S.C. 1395rr(b)(7)) shall be
increased by 1.2 percent.
SEC. ____14. EXTENSION OF THE AUTHORIZATION FOR
APPROPRIATIONS FOR VACCINES OUTREACH EXPANSION.
Section 4107(b) of the Balanced Budget Act of 1997 (42
U.S.C. 1395x note) is amended by striking ``2002'' and
inserting ``2003''.
SEC. ____15. EXTENSION OF MORATORIUM ON THERAPY CAPS.
Section 1833(g)(4) (42 U.S.C. 1395l(g)(4)) is amended by
striking ``and 2002'' and inserting ``2002, and 2003''.
SEC. ____16. INCREASE IN THE CONVERSION FACTOR FOR PAYMENTS
UNDER THE MEDICARE PHYSICIAN FEE SCHEDULE.
(a) In General.--Section 1848(d)(5)(A) of the Social
Security Act (42 U.S.C. 1395w-4(d)(5)(A)), as added by
section 402 of the Miscellaneous Appropriations Act, 2003
(Public Law 108-7), is amended by inserting ``increased by 2
percent'' after ``2002''.
(b) Effective Date.--The amendment made by subsection (a)
shall take effect as if included in the enactment of such
section 402.
SEC. ____17. REVISION OF MEDICARE+CHOICE MINIMUM PERCENTAGE
INCREASE.
Section 1853(c)(1)(C) (42 U.S.C. 1395w-23(c)(1)(C)) is
amended by striking clause (iv) and inserting the following:
``(iv) For 2002, 102 percent of the annual Medicare+Choice
capitation rate under this paragraph for the area for 2001.
``(v) For 2003, 104 percent of the annual Medicare+Choice
capitation rate under this paragraph for the area for 2002.
``(vii) For 2004 and each succeeding year, 102 percent of
the annual Medicare+Choice capitation rate under this
paragraph for the area for the previous year.''.
Subtitle B--Medicaid Provisions
SEC. ____21. EXTENSION OF MEDICARE COST-SHARING FOR PART B
PREMIUM FOR CERTAIN ADDITIONAL LOW-INCOME
MEDICARE BENEFICIARIES.
Section 136 of Public Law 107-229, as added by section 5 of
Public Law 107-240, is amended by striking ``60 days after
the date specified in section 107(c) of Public Law 107-229,
as amended'' and inserting ``September 30, 2003''.
SEC. ____22. MEDICAID DSH ALLOTMENTS.
(a) Continuation of BIPA Rule for Determination of
Allotments for Fiscal Year 2003.--
(1) In general.--Section 1923(f)(4) (42 U.S.C. 1396r-
4(f)(4)) is amended--
(A) in the paragraph heading, by striking ``and 2002'' and
inserting ``through 2003'';
(B) in subparagraph (A)--
(i) in clause (i), by striking ``and'' at the end;
(ii) in clause (ii), by striking the period and inserting
``; and''; and
(iii) by adding at the end the following:
``(iii) fiscal year 2003, shall be the DSH allotment
determined under clause (ii) increased, subject to
subparagraph (B) and paragraph (5), by the percentage change
in the consumer price index for all urban consumers (all
items; U.S. city average) for fiscal year 2002.''; and
(C) in subparagraph (C)--
(i) in the subparagraph heading, by striking ``2002'' and
inserting ``2003''; and
(ii) by striking ``2003'' and inserting ``2004''.
(2) Conforming amendments.--Section 1923(f)(3) (42 U.S.C.
1396r-4(f)(3)) is amended--
(A) in the paragraph heading, by striking ``2003'' and
inserting ``2004''; and
(B) by striking subparagraph (A) and inserting the
following:
``(A) In general.--The DSH allotment for any State--
``(i) for fiscal year 2004, is equal to the DSH allotment
determined for the State for fiscal year 2002 under the table
set forth in paragraph (2), increased, subject to
subparagraph (B) and paragraph (5), by the percentage change
in the Consumer Price Index for all urban consumers (all
items; U.S. city average), for fiscal year 2004; and
``(ii) for fiscal year 2005 and each succeeding fiscal
year, is equal to the DSH allotment determined for the State
for the preceding fiscal year under this paragraph,
increased, subject to subparagraph (B) and paragraph (5), by
the percentage change in the Consumer Price Index for all
urban consumers (all items; U.S. city average), for the
previous fiscal year.''.
(b) Increase in Floor for Treatment as an Extremely Low DSH
State to 3 Percent in Fiscal Year 2003.--Section 1923(f)(5)
(42 U.S.C. 1396r-4(f)(5)) is amended--
[[Page S6333]]
(1) by striking ``fiscal year 1999'' and inserting ``fiscal
year 2001'';
(2) by striking ``Health Care Financing Administration''
and inserting ``Centers for Medicare & Medicaid Services'';
(3) by striking ``August 31, 2000'' and inserting ``August
31, 2002'';
(4) by striking ``1 percent'' each place it appears and
inserting ``3 percent''; and
(5) by striking ``fiscal year 2001'' and inserting ``fiscal
year 2003 (as determined under paragraph (4)(A)(iii))''.
Subtitle C--Application and Budget Scorekeeping
SEC. ____31. APPLICATION OF PROVISIONS OF TITLE.
(a) Application Only to Last 6 Months of Fiscal Year
2003.--Except for the amendments made by sections ____16 and
____21, the provisions of, and amendments made by, this title
shall only apply to the Social Security Act, the Balanced
Budget Act of 1997, the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (Appendix F, 113 Stat.
1501A-321), as enacted into law by section 1000(a)(6) of
Public Law 106-113, and BIPA during the period that begins on
April 1, 2003, and ends on September 30, 2003.
(b) No Effect on Periods Beyond September 30, 2003.--All
provisions of, and amendments made by, this title shall not
apply after September 30, 2003, and, after such date, the
Social Security Act, the Balanced Budget Act of 1997, the
Medicare, Medicaid, and SCHIP Balanced Budget Refinement Act
of 1999 (Appendix F, 113 Stat. 1501A-321), as enacted into
law by section 1000(a)(6) of Public Law 106-113, and BIPA
shall be applied and administered as if the provisions of,
and amendments made by, this title had not been enacted.
On page 19, strike lines 7 through 15, and insert the
following:
``(2) Limitation.--Paragraph (1) shall apply to qualified
dividend income of a taxpayer only to the extent such income
does not exceed the sum of $500 ($250 in the case of a
married individual filing a separate return).
On page 26, strike lines 17 through 22.
______
SA 600. Mr. SCHUMER submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
Strike section 371 and insert the following:
SEC. 371. TEMPORARY STATE FISCAL RELIEF FUND.
(a) Authority To Make Payments To States.--
(1) In general.--Not later than 45 days after the date of
enactment of this Act, the Secretary of the Treasury (in this
section referred to as the ``Secretary'') shall establish a
program under which the Secretary shall make a payment to
each State in which the chief executive officer of the State,
or the chief executive officer's designee, in consultation
and coordination with other State and local officials,
notifies the Secretary not later than 6 months after the date
of enactment of this Act that the State intends to use the
payment in accordance with this section.
(2) Requirement.--In making payments to States under this
section, the Secretary shall ensure that not more than 50
percent of the aggregate amount made available for payments
under this section (after the application of subsection (f))
is paid to States in fiscal year 2003.
(b) Use of Payment.--
(1) In general.--Subject to paragraph (2), a State shall
use the funds provided under a payment made under this
section to carry out 1 or more of the following activities:
(A) Improving education or job training.
(B) Improving health care services.
(C) Improving transportation or other infrastructure.
(D) Improving law enforcement or public safety.
(E) Maintaining essential government services.
(2) Limitation.--A State may only use funds provided under
a payment made under this section for types of expenditures
permitted under the most recently approved budget for the
State.
(c) Certifications.--In order to receive a payment under
this section, the State shall provide the Secretary with
certifications that--
(1) the State's proposed uses of the funds are consistent
with subsection (b); and
(2) the State will allocate 50 percent of the funds
directly to units of general local government based on the
relative local population proportion for the State (as
defined in subsection (d)(5)) and not use the funds to
supplant State funding or revenue that the State otherwise
provides to units of general local government.
(d) Amount of Payment.--
(1) In general.--The amount of payment made to a State
under this section shall be the minimum payment amount
described in paragraph (2) plus the relative population
proportion amount described in paragraph (3).
(2) Minimum payment amount.--The minimum payment amount
described in this paragraph is--
(A) in the case of any of the several States, the District
of Columbia, or the Commonwealth of Puerto Rico, one-half of
1 percent of the aggregate amount made available for payments
under this section (after the application of subsection (f));
and
(B) in the case of the United States Virgin Islands, Guam,
the Commonwealth of the Northern Mariana Islands, or American
Samoa, one-tenth of 1 percent of such aggregate amount (after
the application of subsection (f)).
(3) Relative population proportion amount.--The relative
population proportion amount described in this paragraph is
the product of--
(A) the aggregate amount made available for payments under
this section (after the application of subsection (f)) minus
the total of all of the minimum payment amounts determined
under paragraph (2); and
(B) the relative State population proportion (as defined in
paragraph (4)).
(4) Relative state population proportion defined.--In this
section, the term ``relative State population proportion''
means, with respect to a State, the amount equal to the
quotient of--
(A) the population of the State (as reported in the most
recent decennial census); and
(B) the total population of all States (as reported in the
most recent decennial census).
(5) Relative local population proportion defined.--In this
section, the term ``relative local population proportion''
means, with respect to a unit of general local government
within a State, the amount equal to the quotient of--
(A) the population of such unit of general local government
(as reported in the most recent decennial census); and
(B) the total population of the State (as reported in the
most recent decennial census).
(e) Appropriation.--There is authorized to be appropriated
and is appropriated for making payments under this section,
$30,000,000,000 for fiscal year 2003. Amounts appropriated
under this subsection shall remain available for expenditure
through December 31, 2004.
(f) Temporary Increase of Medicaid FMAP.--
(1) Permitting maintenance of fiscal year 2002 fmap for
last 2 calendar quarters of fiscal year 2003.--Subject to
paragraph (5), if the FMAP determined without regard to this
subsection for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this subsection.
(2) Permitting maintenance of fiscal year 2003 fmap for
first 3 quarters of fiscal year 2004.--Subject to paragraph
(5), if the FMAP determined without regard to this subsection
for a State for fiscal year 2004 is less than the FMAP as so
determined for fiscal year 2003, the FMAP for the State for
fiscal year 2003 shall be substituted for the State's FMAP
for the first, second, and third calendar quarters of fiscal
year 2004, before the application of this subsection.
(3) General 3.73 percentage points increase for last 2
calendar quarters of fiscal year 2003 and first 3 calendar
quarters of fiscal year 2004.--Subject to paragraphs (5) and
(6), for each State for the third and fourth calendar
quarters of fiscal year 2003 and for the first, second, and
third calendar quarters of fiscal year 2004, the FMAP (taking
into account the application of paragraphs (1) and (2)) shall
be increased by 3.73 percentage points.
(4) Increase in cap on medicaid payments to territories.--
Subject to paragraph (6), with respect to the third and
fourth calendar quarters of fiscal year 2003 and the first,
second, and third calendar quarters of fiscal year 2004, the
amounts otherwise determined for Puerto Rico, the Virgin
Islands, Guam, the Northern Mariana Islands, and American
Samoa under subsections (f) and (g) of section 1108 of the
Social Security Act (42 U.S.C. 1308) shall each be increased
by an amount equal to 7.56 percent of such amounts.
(5) Scope of application.--The increases in the FMAP for a
State under this subsection shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(A) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4); or
(B) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.).
(6) State eligibility.--
(A) In general.--Subject to subparagraph (B), a State is
eligible for an increase in its FMAP under paragraph (3) or
an increase in a cap amount under paragraph (4) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(B) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, but prior to the date of
enactment of this Act is eligible for an increase in its FMAP
under paragraph (3) or an increase in a cap amount under
paragraph (4) in the first calendar quarter (and subsequent
calendar quarters) in which the State has reinstated
eligibility that is no more restrictive than the eligibility
under such plan (or waiver) as in effect on September 2,
2003.
[[Page S6334]]
(C) Rule of construction.--Nothing in subparagraph (A) or
(B) shall be construed as affecting a State's flexibility
with respect to benefits offered under the State medicaid
program under title XIX of the Social Security Act (42 U.S.C.
1396 et seq.) (including any waiver under such title or under
section 1115 of such Act (42 U.S.C. 1315)).
(7) Funding.--Notwithstanding subsection (e), from the
amounts appropriated in such section for fiscal year 2003,
$15,000,000,000 of such amount is hereby transferred and made
available for the purpose of increasing the FMAP for States
in accordance with this subsection. Amounts transferred under
this paragraph shall remain available for expenditure through
September 30, 2004.
(8) Definitions.--In this subsection:
(A) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(B) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(9) Repeal of fmap increase.--Effective as of October 1,
2004, this subsection is repealed.
(g) Repeal of other provisions.--Effective as of January 1,
2005, subsections (a) through (e) of this section are
repealed.
(h) Revision of Partial Exclusion of Dividends Received By
Individuals.--
(1) In general.--Section 116(a)(2)(B), as added by section
201 of this Act, is amended by striking ``2007'' and
inserting ``2010''.
(2) Conforming amendments.--Sections 531(a) and 541(a), as
amended by section 201 of this Act, are each amended by
striking ``2007'' and inserting ``2010''.
(3) Application of sunset.--Section 601(a) of this Act
shall apply to the amendments made by paragraphs (1) and (2).
______
SA 601. Ms. CANTWELL submitted an amendment intended to be proposed
by her to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V add the
following:
SEC. ____. LONG-TERM CARE INCENTIVES.
(a) Deduction for Premiums on Qualified Long-Term Care
Insurance Contracts.--
(1) In general.--Part VII of subchapter B of chapter 1
(relating to additional itemized deductions) is amended by
redesignating section 223 as section 224 and by inserting
after section 222 the following new subsection:
``SEC. 223. PREMIUMS ON QUALIFIED LONG-TERM CARE INSURANCE
CONTRACTS.
``(a) In General.--In the case of an individual, there
shall be allowed as a deduction an amount equal to the
applicable percentage of eligible long-term care premiums (as
defined in section 213(d)(10)) paid during the taxable year
by the taxpayer for coverage for the taxpayer and the spouse
and dependents of the taxpayer.
``(b) Applicable Percentage.--For purposes of subsection
(a), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning in calendarThe applicable percentage is--
2003, 2004, and 2005..........................................25 ....
2006 and 2007.................................................30 ....
2008 and 2009.................................................35 ....
2010 and 2011.................................................40 ....
2012 and thereafter...........................................50.....
``(c) Limitation Based on Modified Adjusted Gross Income.--
``(1) In general.--No deduction shall be allowed under
subsection (a) to any taxpayer if the modified adjusted gross
income of such taxpayer for the taxable year exceeds $60,000
($120,000 in the case of a joint return).
``(2) Modified adjusted gross income.--For purposes of
paragraph (1), the term `modified adjusted gross income'
means adjusted gross income determined--
``(A) without regard to this section and sections 911, 931,
and 933, and
``(B) after application of sections 86, 135, 137, 219, 221,
222, and 469.
``(d) Limitation Based on Subsidized Coverage.--
``(1) In general.--Subsection (a) shall not apply to
premiums paid for coverage of any individual for any calendar
month if--
``(A) for such month such individual is covered by any
insurance which is advertised, marketed, or offered as long-
term care insurance under any health plan maintained by any
employer of the taxpayer or of the taxpayer's spouse, and
``(B) 50 percent or more of the cost of any such coverage
(determined under section 4980B) for such month is paid or
incurred by the employer.
``(2) Plans maintained by certain employers.--A health plan
which is not otherwise described in paragraph (1)(A) shall be
treated as described in such paragraph if such plan would be
so described if all health plans of persons treated as a
single employer under subsection (b), (c), (m), or (o) of
section 414 were treated as one health plan.
``(e) Coordination With Other Deductions.--Any amount taken
into account under subsection (a) shall not be taken into
account in computing the amount allowable as a deduction
under section 162(l) or 213(a).
``(f) Married Couples Must File Joint Return.--
``(1) In general.--If the taxpayer is married at the close
of the taxable year, the deduction shall be allowed under
subsection (a) only if the taxpayer and the taxpayer's spouse
file a joint return for the taxable year.
``(2) Marital status.--For purposes of paragraph (1),
marital status shall be determined in accordance with section
7703.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out this section,
including regulations requiring employers to report to their
employees and the Secretary such information as the Secretary
determines to be appropriate.''.
(2) Deduction allowed whether or not taxpayer itemizes.--
Subsection (a) of section 62 is amended by inserting after
paragraph (18) the following new item:
``(19) Premiums on qualified long-term care insurance
contracts.--The deduction allowed by section 223.''.
(3) Conforming amendments.--
(A) Sections 86(b)(2)(A), 135(c)(4)(A), 137(b)(3)(A),
219(g)(3)(A)(ii), and 221(b)(2)(C)(i) are each amended by
inserting ``223,'' after ``222,''.
(B) Section 222(b)(2)(C)(i) is amended by inserting
``223,'' before ``911''.
(C) Section 469(i)(3)(F)(iii) is amended by striking ``and
222'' and inserting ``222, and 223''.
(4) Clerical amendment.--The table of sections for part VII
of subchapter B of chapter 1 is amended by striking the last
item and inserting the following new items:
``Sec. 223. Premiums on qualified long-term care insurance contracts.
``Sec. 224. Cross reference.''.
(5) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(b) Additional Personal Exemption for Dependents with Long-
Term Care Needs in Taxpayer's Home.--
(1) In general.--Section 151 (relating to allowance of
deductions for personal exemptions) is amended by
redesignating subsections (d) and (e) as subsections (e) and
(f), respectively, and by inserting after subsection (c) the
following new subsection:
``(d) Additional Exemption for Dependents With Long-Term
Care Needs in Taxpayer's Home.--
``(1) In general.--Except as provided in paragraph (2), an
exemption of the exemption amount for each qualified family
member of the taxpayer.
``(2) Phase-in.--In the case of taxable years beginning in
calendar years before 2012, the amount of the exemption
provided under paragraph (1) shall not exceed the applicable
limitation amount determined in accordance with the following
table:
``For taxable years beginning in cThe applicable limitation amount is--
2003 and 2004...............................................$500 ....
2005 and 2006..............................................1,000 ....
2007 and 2008..............................................1,500 ....
2009 and 2010..............................................2,000 ....
2011.......................................................2,500.....
``(3) Qualified family member.--For purposes of this
subsection, the term `qualified family member' means, with
respect to any taxable year, any individual--
``(A) who is--
``(i) the spouse of the taxpayer, or
``(ii) a dependent of the taxpayer with respect to whom the
taxpayer is entitled to an exemption under subsection (c),
``(B) who is an individual with long-term care needs during
any portion of the taxable year, and
``(C) other than an individual described in section
152(a)(9), who, for more than half of such year, has as such
individual's principal place of abode the home of the
taxpayer and is a member of the taxpayer's household.
``(4) Individuals with long-term care needs.--For purposes
of this subsection, the term `individual with long-term care
needs' means, with respect to any taxable year, an individual
who has been certified, during the 39\1/2\-month period
ending on the due date (without extensions) for filing the
return of tax for the taxable year (or such other period as
the Secretary prescribes), by a physician (as defined in
section 1861(r)(1) of the Social Security Act) as being, for
a period which is at least 180 consecutive days--
``(A) an individual who is unable to perform (without
substantial assistance from another individual) at least 2
activities of daily living (as defined in section
7702B(c)(2)(B)) due to a loss of functional capacity, or
``(B) an individual who requires substantial supervision to
protect such individual from threats to health and safety due
to severe cognitive impairment and is unable to perform,
without reminding or cuing assistance, at least 1 activity of
daily living (as so defined) or to the extent provided in
regulations prescribed by the Secretary (in consultation with
the Secretary of Health and Human Services), is unable to
engage in age appropriate activities.
``(5) Identification requirement.--No exemption shall be
allowed under this subsection to a taxpayer with respect to
any qualified family member unless the taxpayer includes, on
the return of tax for the taxable year, the name and taxpayer
identification of the physician certifying such member. In
the case of a failure to provide the information required
under the preceding sentence, the preceding sentence shall
not apply if it is shown that the taxpayer exercised due
diligence in attempting to provide the information so
required.
``(6) Special rules.--Rules similar to the rules of
paragraphs (2), (3), and (4) of section
[[Page S6335]]
21(e) shall apply for purposes of this subsection.''.
(2) Conforming amendments.--
(A) Section 1(f)(6)(A) is amended by striking ``151(d)(4)''
and inserting ``151(e)(4)''.
(B) Section 1(f)(6)(B) is amended by striking
``151(d)(4)(A)'' and inserting ``151(e)(4)(A)''.
(C) Section 3402(f)(1)(A) is amended by striking
``151(d)(2)'' and inserting ``151(e)(2)''.
(D) Section 3402(r)(2)(B) is amended by striking ``151(d)''
and inserting ``151(e)''.
(E) Section 6012(a)(1)(D)(ii) is amended--
(i) by striking ``151(d)'' and inserting ``151(e)'', and
(ii) by striking ``151(d)(2)'' and inserting ``151(e)(2)''.
(F) Section 6013(b)(3)(A) is amended by striking ``151(d)''
and inserting ``151(e)''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(c) Additional Consumer Protections for Long-Term Care
Insurance.--
(1) In general.--Subparagraphs (A) and (B) of section
7702B(g)(2) (relating to requirements of model regulation and
Act) are amended to read as follows:
``(A) In general.--The requirements of this paragraph are
met with respect to any contract if such contract meets--
``(i) Model regulation.--The following requirements of the
model regulation:
``(I) Section 6A (relating to guaranteed renewal or
noncancellability), and the requirements of section 6B of the
model Act relating to such section 6A.
``(II) Section 6B (relating to prohibitions on limitations
and exclusions).
``(III) Section 6C (relating to extension of benefits).
``(IV) Section 6D (relating to continuation or conversion
of coverage).
``(V) Section 6E (relating to discontinuance and
replacement of policies).
``(VI) Section 7 (relating to unintentional lapse).
``(VII) Section 8 (relating to disclosure), other than
section 8F thereof.
``(VIII) Section 11 (relating to prohibitions against post-
claims underwriting).
``(IX) Section 12 (relating to minimum standards).
``(X) Section 13 (relating to requirement to offer
inflation protection), except that any requirement for a
signature on a rejection of inflation protection shall permit
the signature to be on an application or on a separate form.
``(XI) Section 25 (relating to prohibition against
preexisting conditions and probationary periods in
replacement policies or certificates).
``(XII) The provisions of section 26 relating to contingent
nonforfeiture benefits, if the policyholder declines the
offer of a nonforfeiture provision described in paragraph
(4).
``(ii) Model act.--The following requirements of the model
Act:
``(I) Section 6C (relating to preexisting conditions).
``(II) Section 6D (relating to prior hospitalization).
``(III) The provisions of section 8 relating to contingent
nonforfeiture benefits, if the policyholder declines the
offer of a nonforfeiture provision described in paragraph
(4).
``(B) Definitions.--For purposes of this paragraph--
``(i) Model provisions.--The terms `model regulation' and
`model Act' means the long-term care insurance model
regulation, and the long-term care insurance model Act,
respectively, promulgated by the National Association of
Insurance Commissioners (as adopted as of October 2000).
``(ii) Coordination.--Any provision of the model regulation
or model Act listed under clause (i) or (ii) of subparagraph
(A) shall be treated as including any other provision of such
regulation or Act necessary to implement the provision.
``(iii) Determination.--For purposes of this section and
section 4980C, the determination of whether any requirement
of a model regulation or the model Act has been met shall be
made by the Secretary.''.
(2) Excise tax.--Paragraph (1) of section 4980C(c)
(relating to requirements of model provisions) is amended to
read as follows:
``(1) Requirements of model provisions.--
``(A) Model regulation.--The following requirements of the
model regulation must be met:
``(i) Section 9 (relating to required disclosure of rating
practices to consumer).
``(ii) Section 14 (relating to application forms and
replacement coverage).
``(iii) Section 15 (relating to reporting requirements),
except that the issuer shall also report at least annually
the number of claims denied during the reporting period for
each class of business (expressed as a percentage of claims
denied), other than claims denied for failure to meet the
waiting period or because of any applicable preexisting
condition.
``(iv) Section 22 (relating to filing requirements for
advertising).
``(v) Section 23 (relating to standards for marketing),
including inaccurate completion of medical histories, other
than paragraphs (1), (6), and (9) of section 23C, except
that--
``(I) in addition to such requirements, no person shall, in
selling or offering to sell a qualified long-term care
insurance contract, misrepresent a material fact; and
``(II) no such requirements shall include a requirement to
inquire or identify whether a prospective applicant or
enrollee for long-term care insurance has accident and
sickness insurance.
``(vi) Section 24 (relating to suitability).
``(vii) Section 29 (relating to standard format outline of
coverage).
``(viii) Section 30 (relating to requirement to deliver
shopper's guide).
The requirements referred to in clause (vi) shall not include
those portions of the personal worksheet described in
Appendix B of the model regulation relating to consumer
protection requirements not imposed by section 4980C or
7702B.
``(B) Model act.--The following requirements of the model
Act must be met:
``(i) Section 6F (relating to right to return), except that
such section shall also apply to denials of applications and
any refund shall be made within 30 days of the return or
denial.
``(ii) Section 6G (relating to outline of coverage).
``(iii) Section 6H (relating to requirements for
certificates under group plans).
``(iv) Section 6J (relating to policy summary).
``(v) Section 6K (relating to monthly reports on
accelerated death benefits).
``(vi) Section 7 (relating to incontestability period).
``(C) Definitions.--For purposes of this paragraph, the
terms `model regulation' and `model Act' have the meanings
given such term by section 7702B(g)(2)(B).''.
(3) Effective date.--The amendments made by this subsection
shall apply to policies issued after December 31, 2003.
(d) Revision of Partial Exclusion of Dividends Received By
Individuals.--Section 116(a)(2)(B) of the Internal Revenue
Code of 1986, as added by section 201 of this Act, is amended
by striking ``2007'' and inserting ``2009''.
______
SA 602. Mr. BYRD submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
On page 190, line 4, strike all through page 195, line 3.
______
SA 603. Mr. BINGAMAN submitted an amendment intended to be proposed
by him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
On page 22, between lines 21 and 22, insert the following:
``(7) Small business retirement plans.--For purposes of
small business plans, defined as any qualified plan
maintained by an employer with fewer than 25 employees, the
cost basis for the employees' retirement plan accounts would
be adjusted by the amount of dividends received by the
underlying investments in the account that would otherwise be
excluded from taxable income if held individually.''
______
SA 604. Mr. BINGAMAN submitted an amendment intended to be proposed
by him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V, add the following:
SEC. ____. REPEAL OF PARTIAL EXCLUSION OF DIVIDENDS AND
ELIMINATION OF ACCELERATION OF TOP RATE
REDUCTION IN INDIVIDUAL INCOME TAX RATES AND
ESTABLISHMENT OF UNINSURED RESERVE FUND.
(a) Repeal of Partial Exclusion of Dividends.--Section 201
of this Act, and the amendments made by such section, are
repealed.
(b) Elimination of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar years 2003, 2004, and 2005, the following
percentages shall be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
(c) Uninsured Reserve Fund.--There is hereby established in
the Treasury of the United States a reserve fund to provide
health care coverage for the uninsured to which is
appropriated the revenues resulting from the enactment and
application of subsections (a) and (b).
______
SA 605. Ms. MIKULSKI, (for herself, Mr. Kennedy, Mr. Sarbanes, Mr.
Johnson, Mrs. Clinton, and Mr. Durbin) submitted an amendment intended
to be proposed by her to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; which was ordered to lie on the table;
as follows:
At the end of subtitle C of title V, insert the following:
SEC. ____. LONG-TERM CARE CREDIT.
(a) Allowance of Credit.--
(1) In general.--Paragraph (1) of section 24(a) (relating
to allowance of child tax credit) is amended to read as
follows:
[[Page S6336]]
``(1) In general.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year
an amount equal to the sum of--
``(A) the per child amount multiplied by the number of
qualifying children of the taxpayer, plus
``(B) the sum of the eligible expenses of the taxpayer for
each applicable individual with respect to whom the taxpayer
is an eligible caregiver for the taxable year.''.
(2) Limitation.--Section 24(b) is amended by redesignating
paragraphs (1), (2), and (3) as paragraphs (2), (3), and (4),
respectively, and by inserting before paragraph (2) (as
redesignated by this paragraph) the following new paragraph:
``(1) In general.--The credit allowed under subsection
(a)(1)(B) shall not exceed $5,000 for any taxable year.''.
(3) Conforming amendments.--
(A) Section 24(d)(1) is amended by striking ``subsection
(b)(3)'' each place it appears and inserting ``subsection
(b)(4)''.
(B) The heading for section 24 is amended to read as
follows:
``SEC. 24. FAMILY CARE CREDIT.''.
(C) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by striking the item
relating to section 24 and inserting the following new item:
``Sec. 24. Family care credit.''.
(b) Eligible Expenses.--
(1) In general.--Section 24 is amended by redesignating
subsections (b) through (f) as subsections (c) through (g),
respectively, and by inserting after subsection (a) the
following new subsection:
``(b) Eligible Expenses.--For the purposes of this
section--
``(1) In general.--The term `eligible expenses' means
expenses incurred by the taxpayer for--
``(A) medical care (as defined in section 213(d)(1) without
regard to subparagraph (D) thereof),
``(B) lodging away from home in accordance with section
213(d)(2),
``(C) adult day care,
``(D) custodial care,
``(E) respite care, and
``(F) other specialized services for children, including
day care for children with special needs.
Such term shall not include any expense for which the
taxpayer is reimbursed by another person.
``(2) Adult day care.--The term `adult day care' means care
provided for adults with functional or cognitive impairments
through a structured, community-based group program which
provides health, social, and other related support services
on a less than 24-hour per day basis.
``(3) Custodial care.--The term `custodial care' means
reasonable personal care services provided to assist with
daily living and which do not require the skills of qualified
technical or professional personnel.
``(4) Respite care.--The term `respite care' means planned
or emergency care provided to an applicable individual in
order to provide temporary relief to an eligible
caregiver.''.
(2) Conforming amendments.--
(A) Section 24(e)(1) (relating to portion of credit
refundable), as redesignated by paragraph (1) and as amended
by subsection (a)(3)(A), is amended by striking ``subsection
(b)(4)'' each place it appears and inserting ``subsection
(c)(4)''.
(B) Section 501(c)(26) is amended by striking ``section
24(c)'' and inserting ``section 24(d)''.
(C) Section 6211(b)(4)(A) is amended by striking ``section
24(d)'' and inserting ``section 24(e)''.
(D) Section 6213(g)(2)(I) is amended by striking ``section
24(e)'' and inserting ``section 24(f)''.
(c) Definitions.--Subsection (d) of section 24, as
redesignated by subsection (b)(1), is amended to read as
follows:
``(d) Definitions.--For purposes of this section--
``(1) Qualifying child.--
``(A) In general.--The term `qualifying child' means any
individual if--
``(i) the taxpayer is allowed a deduction under section 151
with respect to such individual for the taxable year,
``(ii) such individual has not attained the age of 17 as of
the close of the calendar year in which the taxable year of
the taxpayer begins, and
``(iii) such individual bears a relationship to the
taxpayer described in section 32(c)(3)(B).
``(B) Exception for certain noncitizens.--The term
`qualifying child' shall not include any individual who would
not be a dependent if the first sentence of section 152(b)(3)
were applied without regard to all that follows `resident of
the United States'.
``(2) Applicable individual.--
``(A) In general.--The term `applicable individual' means,
with respect to any taxable year, any individual who has been
certified, before the due date for filing the return of tax
for the taxable year (without extensions), by a physician (as
defined in section 1861(r)(1) of the Social Security Act) as
being an individual with long-term care needs described in
subparagraph (B) for a period--
``(i) which is at least 180 consecutive days, and
``(ii) a portion of which occurs within the taxable year.
Such term shall not include any individual otherwise meeting
the requirements of the preceding sentence unless within the
39\1/2\ month period ending on such due date (or such other
period as the Secretary prescribes) a physician (as so
defined) has certified that such individual meets such
requirements.
``(B) Individuals with long-term care needs.--An individual
is described in this subparagraph if the individual meets any
of the following requirements:
``(i) The individual is at least 18 years of age and--
``(I) is unable to perform (without substantial assistance
from another individual) at least 3 activities of daily
living (as defined in section 7702B(c)(2)(B)) due to a loss
of functional capacity, or
``(II) requires substantial supervision to protect such
individual from threats to health and safety due to severe
cognitive impairment and is unable to perform at least 1
activity of daily living (as so defined) or to the extent
provided in regulations prescribed by the Secretary (in
consultation with the Secretary of Health and Human
Services), is unable to engage in age appropriate activities.
``(ii) The individual is at least 6 but not 18 years of age
and--
``(I) is unable to perform (without substantial assistance
from another individual) at least 3 activities of daily
living (as defined in section 7702B(c)(2)(B)) due to a loss
of functional capacity,
``(II) requires substantial supervision to protect such
individual from threats to health and safety due to severe
cognitive impairment and is unable to perform at least 1
activity of daily living (as so defined) or to the extent
provided in regulations prescribed by the Secretary (in
consultation with the Secretary of Health and Human
Services), is unable to engage in age appropriate activities,
``(III) has a level of disability similar to the level of
disability described in subclause (I) (as determined under
regulations promulgated by the Secretary), or
``(IV) has a complex medical condition (as defined by the
Secretary) that requires medical management and coordination
of care.
``(iii) The individual is at least 2 but not 6 years of age
and--
``(I) is unable due to a loss of functional capacity to
perform (without substantial assistance from another
individual) at least 2 of the following activities: eating,
transferring, or mobility,
``(II) has a level of disability similar to the level of
disability described in subclause (I) (as determined under
regulations promulgated by the Secretary), or
``(III) has a complex medical condition (as defined by the
Secretary) that requires medical management and coordination
of care.
``(iv) The individual is under 2 years of age and--
``(I) requires specific durable medical equipment by reason
of a severe health condition or requires a skilled
practitioner trained to address the individual's condition to
be available if the individual's parents or guardians are
absent,
``(II) has a level of disability similar to the level of
disability described in subclause (I) (as determined under
regulations promulgated by the Secretary), or
``(III) has a complex medical condition (as defined by the
Secretary) that requires medical management and coordination
of care.
``(v) The individual has 5 or more chronic conditions (as
defined in subparagraph (C)) and is unable to perform
(without substantial assistance from another individual) at
least 1 activity of daily living (as so defined) due to a
loss of functional capacity.
``(C) Chronic condition.--For purposes of this paragraph,
the term `chronic condition' means a condition that lasts for
at least 6 consecutive months and requires ongoing medical
care.
``(3) Eligible caregiver.--
``(A) In general.--A taxpayer shall be treated as an
eligible caregiver for any taxable year with respect to the
following individuals:
``(i) The taxpayer.
``(ii) The taxpayer's spouse.
``(iii) An individual with respect to whom the taxpayer is
allowed a deduction under section 151 for the taxable year.
``(iv) An individual who would be described in clause (iii)
for the taxable year if section 151(c)(1)(A) were applied by
substituting for the exemption amount an amount equal to the
sum of the exemption amount, the standard deduction under
section 63(c)(2)(C), and any additional standard deduction
under section 63(c)(3) which would be applicable to the
individual if clause (iii) applied.
``(v) An individual who would be described in clause (iii)
for the taxable year if--
``(I) the requirements of clause (iv) are met with respect
to the individual, and
``(II) the requirements of subparagraph (B) are met with
respect to the individual in lieu of the support test of
section 152(a).
``(B) Residency test.--The requirements of this
subparagraph are met if an individual has as such
individual's principal place of abode the home of the
taxpayer and--
``(i) in the case of an individual who is an ancestor or
descendant of the taxpayer or the taxpayer's spouse, is a
member of the taxpayer's household for over half the taxable
year, or
``(ii) in the case of any other individual, is a member of
the taxpayer's household for the entire taxable year.
[[Page S6337]]
``(C) Special rules where more than 1 eligible caregiver.--
``(i) In general.--If more than 1 individual is an eligible
caregiver with respect to the same applicable individual for
taxable years ending with or within the same calendar year, a
taxpayer shall be treated as the eligible caregiver if each
such individual (other than the taxpayer) files a written
declaration (in such form and manner as the Secretary may
prescribe) that such individual will not claim such
applicable individual for the credit under this section.
``(ii) No agreement.--If each individual required under
clause (i) to file a written declaration under clause (i)
does not do so, the individual with the highest modified
adjusted gross income (as defined in section 32(c)(5)) shall
be treated as the eligible caregiver.
``(iii) Married individuals filing separately.--In the case
of married individuals filing separately, the determination
under this subparagraph as to whether the husband or wife is
the eligible caregiver shall be made under the rules of
clause (ii) (whether or not one of them has filed a written
declaration under clause (i)).''.
(d) Identification Requirements.--
(1) In general.--Section 24(f) (relating to identification
requirement), as redesignated by subsection(b)(1), is amended
by adding at the end the following new sentence: ``No credit
shall be allowed under this section to a taxpayer with
respect to any applicable individual unless the taxpayer
includes the name and taxpayer identification number of such
individual, and the identification number of the physician
certifying such individual, on the return of tax for the
taxable year.''.
(2) Assessment.--Section 6213(g)(2)(I) is amended--
(A) by inserting ``or physician identification'' after
``correct TIN'', and
(B) by striking ``child tax'' and inserting ``family
care''.
(e) Denial of Double Benefit.--
(1) In general.--Section 213(e) (relating to exclusion of
amounts allowed for care of certain dependents) is amended by
inserting ``or section 24'' after ``section 21''.
(2) Conforming amendment.--The heading of section 213(e) is
amended by inserting ``Long-Term Care or'' after ``for''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the later of
December 31, 2003, or the date of the enactment of this Act.
SEC. ____. ADDITIONAL LIMITATION ON EXCLUSION OF DIVIDENDS.
(a) In General.--Paragraph (2) of section 116(a) (relating
to partial exclusion of dividends received by individual), as
amended by section 201 of this Act, is amended by striking
``the sum of'' and all that follows and inserting ``$500
($250 in the case of a married individual filing a separate
return).''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
______
SA 606. Ms. MIKULSKI (for herself, Mr. Kennedy, Mr. Sarbanes, Mr.
Johnson, Mrs. Clinton, and Mr. Durbin) submitted an amendment intended
to be proposed by her to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; which was ordered to lie on the table;
as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. LONG-TERM CARE CREDIT.
(a) Allowance of Credit.--
(1) In general.--Paragraph (1) of section 24(a) (relating
to allowance of child tax credit) is amended to read as
follows:
``(1) In general.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year
an amount equal to the sum of--
``(A) the per child amount multiplied by the number of
qualifying children of the taxpayer, plus
``(B) the sum of the eligible expenses of the taxpayer for
each applicable individual with respect to whom the taxpayer
is an eligible caregiver for the taxable year.''.
(2) Limitation.--Section 24(b) is amended by redesignating
paragraphs (1), (2), and (3) as paragraphs (2), (3), and (4),
respectively, and by inserting before paragraph (2) (as
redesignated by this paragraph) the following new paragraph:
``(1) In general.--The credit allowed under subsection
(a)(1)(B) shall not exceed $5,000 for any taxable year.''.
(3) Conforming amendments.--
(A) Section 24(d)(1) is amended by striking ``subsection
(b)(3)'' each place it appears and inserting ``subsection
(b)(4)''.
(B) The heading for section 24 is amended to read as
follows:
``SEC. 24. FAMILY CARE CREDIT.''.
(C) The table of sections for subpart A of part IV of
subchapter A of chapter 1 is amended by striking the item
relating to section 24 and inserting the following new item:
``Sec. 24. Family care credit.''.
(b) Eligible Expenses.--
(1) In general.--Section 24 is amended by redesignating
subsections (b) through (f) as subsections (c) through (g),
respectively, and by inserting after subsection (a) the
following new subsection:
``(b) Eligible Expenses.--For the purposes of this
section--
``(1) In general.--The term `eligible expenses' means
expenses incurred by the taxpayer for--
``(A) medical care (as defined in section 213(d)(1) without
regard to subparagraph (D) thereof),
``(B) lodging away from home in accordance with section
213(d)(2),
``(C) adult day care,
``(D) custodial care,
``(E) respite care, and
``(F) other specialized services for children, including
day care for children with special needs.
Such term shall not include any expense for which the
taxpayer is reimbursed by another person.
``(2) Adult day care.--The term `adult day care' means care
provided for adults with functional or cognitive impairments
through a structured, community-based group program which
provides health, social, and other related support services
on a less than 24-hour per day basis.
``(3) Custodial care.--The term `custodial care' means
reasonable personal care services provided to assist with
daily living and which do not require the skills of qualified
technical or professional personnel.
``(4) Respite care.--The term `respite care' means planned
or emergency care provided to an applicable individual in
order to provide temporary relief to an eligible
caregiver.''.
(2) Conforming amendments.--
(A) Section 24(e)(1) (relating to portion of credit
refundable), as redesignated by paragraph (1) and as amended
by subsection (a)(3)(A), is amended by striking ``subsection
(b)(4)'' each place it appears and inserting ``subsection
(c)(4)''.
(B) Section 501(c)(26) is amended by striking ``section
24(c)'' and inserting ``section 24(d)''.
(C) Section 6211(b)(4)(A) is amended by striking ``section
24(d)'' and inserting ``section 24(e)''.
(D) Section 6213(g)(2)(I) is amended by striking ``section
24(e)'' and inserting ``section 24(f)''.
(c) Definitions.--Subsection (d) of section 24, as
redesignated by subsection (b)(1), is amended to read as
follows:
``(d) Definitions.--For purposes of this section--
``(1) Qualifying child.--
``(A) In general.--The term `qualifying child' means any
individual if--
``(i) the taxpayer is allowed a deduction under section 151
with respect to such individual for the taxable year,
``(ii) such individual has not attained the age of 17 as of
the close of the calendar year in which the taxable year of
the taxpayer begins, and
``(iii) such individual bears a relationship to the
taxpayer described in section 32(c)(3)(B).
``(B) Exception for certain noncitizens.--The term
`qualifying child' shall not include any individual who would
not be a dependent if the first sentence of section 152(b)(3)
were applied without regard to all that follows `resident of
the United States'.
``(2) Applicable individual.--
``(A) In general.--The term `applicable individual' means,
with respect to any taxable year, any individual who has been
certified, before the due date for filing the return of tax
for the taxable year (without extensions), by a physician (as
defined in section 1861(r)(1) of the Social Security Act) as
being an individual with long-term care needs described in
subparagraph (B) for a period--
``(i) which is at least 180 consecutive days, and
``(ii) a portion of which occurs within the taxable year.
Such term shall not include any individual otherwise meeting
the requirements of the preceding sentence unless within the
39\1/2\ month period ending on such due date (or such other
period as the Secretary prescribes) a physician (as so
defined) has certified that such individual meets such
requirements.
``(B) Individuals with long-term care needs.--An individual
is described in this subparagraph if the individual meets any
of the following requirements:
``(i) The individual is at least 18 years of age and--
``(I) is unable to perform (without substantial assistance
from another individual) at least 3 activities of daily
living (as defined in section 7702B(c)(2)(B)) due to a loss
of functional capacity, or
``(II) requires substantial supervision to protect such
individual from threats to health and safety due to severe
cognitive impairment and is unable to perform at least 1
activity of daily living (as so defined) or to the extent
provided in regulations prescribed by the Secretary (in
consultation with the Secretary of Health and Human
Services), is unable to engage in age appropriate activities.
``(ii) The individual is at least 6 but not 18 years of age
and--
``(I) is unable to perform (without substantial assistance
from another individual) at least 3 activities of daily
living (as defined in section 7702B(c)(2)(B)) due to a loss
of functional capacity,
``(II) requires substantial supervision to protect such
individual from threats to health and safety due to severe
cognitive impairment and is unable to perform at least 1
[[Page S6338]]
activity of daily living (as so defined) or to the extent
provided in regulations prescribed by the Secretary (in
consultation with the Secretary of Health and Human
Services), is unable to engage in age appropriate activities,
``(III) has a level of disability similar to the level of
disability described in subclause (I) (as determined under
regulations promulgated by the Secretary), or
``(IV) has a complex medical condition (as defined by the
Secretary) that requires medical management and coordination
of care.
``(iii) The individual is at least 2 but not 6 years of age
and--
``(I) is unable due to a loss of functional capacity to
perform (without substantial assistance from another
individual) at least 2 of the following activities: eating,
transferring, or mobility,
``(II) has a level of disability similar to the level of
disability described in subclause (I) (as determined under
regulations promulgated by the Secretary), or
``(III) has a complex medical condition (as defined by the
Secretary) that requires medical management and coordination
of care.
``(iv) The individual is under 2 years of age and--
``(I) requires specific durable medical equipment by reason
of a severe health condition or requires a skilled
practitioner trained to address the individual's condition to
be available if the individual's parents or guardians are
absent,
``(II) has a level of disability similar to the level of
disability described in subclause (I) (as determined under
regulations promulgated by the Secretary), or
``(III) has a complex medical condition (as defined by the
Secretary) that requires medical management and coordination
of care.
``(v) The individual has 5 or more chronic conditions (as
defined in subparagraph (C)) and is unable to perform
(without substantial assistance from another individual) at
least 1 activity of daily living (as so defined) due to a
loss of functional capacity.
``(C) Chronic condition.--For purposes of this paragraph,
the term `chronic condition' means a condition that lasts for
at least 6 consecutive months and requires ongoing medical
care.
``(3) Eligible caregiver.--
``(A) In general.--A taxpayer shall be treated as an
eligible caregiver for any taxable year with respect to the
following individuals:
``(i) The taxpayer.
``(ii) The taxpayer's spouse.
``(iii) An individual with respect to whom the taxpayer is
allowed a deduction under section 151 for the taxable year.
``(iv) An individual who would be described in clause (iii)
for the taxable year if section 151(c)(1)(A) were applied by
substituting for the exemption amount an amount equal to the
sum of the exemption amount, the standard deduction under
section 63(c)(2)(C), and any additional standard deduction
under section 63(c)(3) which would be applicable to the
individual if clause (iii) applied.
``(v) An individual who would be described in clause (iii)
for the taxable year if--
``(I) the requirements of clause (iv) are met with respect
to the individual, and
``(II) the requirements of subparagraph (B) are met with
respect to the individual in lieu of the support test of
section 152(a).
``(B) Residency test.--The requirements of this
subparagraph are met if an individual has as such
individual's principal place of abode the home of the
taxpayer and--
``(i) in the case of an individual who is an ancestor or
descendant of the taxpayer or the taxpayer's spouse, is a
member of the taxpayer's household for over half the taxable
year, or
``(ii) in the case of any other individual, is a member of
the taxpayer's household for the entire taxable year.
``(C) Special rules where more than 1 eligible caregiver.--
``(i) In general.--If more than 1 individual is an eligible
caregiver with respect to the same applicable individual for
taxable years ending with or within the same calendar year, a
taxpayer shall be treated as the eligible caregiver if each
such individual (other than the taxpayer) files a written
declaration (in such form and manner as the Secretary may
prescribe) that such individual will not claim such
applicable individual for the credit under this section.
``(ii) No agreement.--If each individual required under
clause (i) to file a written declaration under clause (i)
does not do so, the individual with the highest modified
adjusted gross income (as defined in section 32(c)(5)) shall
be treated as the eligible caregiver.
``(iii) Married individuals filing separately.--In the case
of married individuals filing separately, the determination
under this subparagraph as to whether the husband or wife is
the eligible caregiver shall be made under the rules of
clause (ii) (whether or not one of them has filed a written
declaration under clause (i)).''.
(d) Identification Requirements.--
(1) In general.--Section 24(f) (relating to identification
requirement), as redesignated by subsection(b)(1), is amended
by adding at the end the following new sentence: ``No credit
shall be allowed under this section to a taxpayer with
respect to any applicable individual unless the taxpayer
includes the name and taxpayer identification number of such
individual, and the identification number of the physician
certifying such individual, on the return of tax for the
taxable year.''.
(2) Assessment.--Section 6213(g)(2)(I) is amended--
(A) by inserting ``or physician identification'' after
``correct TIN'', and
(B) by striking ``child tax'' and inserting ``family
care''.
(e) Denial of Double Benefit.--
(1) In general.--Section 213(e) (relating to exclusion of
amounts allowed for care of certain dependents) is amended by
inserting ``or section 24'' after ``section 21''.
(2) Conforming amendment.--The heading of section 213(e) is
amended by inserting ``Long-Term Care or'' after ``for''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the later of
December 31, 2003, or the date of the enactment of this Act.
Strike the first table on page 8 and insert the following:
----------------------------------------------------------------------------------------------------------------
The corresponding percentages shall be substituted for the
``In the case of taxable years beginning following percentages:
during calendar year: ------------------------------------------------------------------
28% 31% 36% 39.6%
----------------------------------------------------------------------------------------------------------------
2001......................................... 27.5% 30.5% 35.5% 39.1%
2002......................................... 27.0% 30.0% 35.0% 38.6%
2003......................................... 25.0% 28.0% 33.0% 38.6%
2004......................................... 25.0% 28.0% 33.0% 37.6%
2005......................................... 25.0% 28.0% 33.0% 37.6%
2006 and thereafter.......................... 25.0% 28.0% 33.0% 35.0%''.
----------------------------------------------------------------------------------------------------------------
______
SA 607. Mr. HOLLINGS (for himself and Mr. Chafee) submitted an
amendment intended to be proposed by him to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; which was ordered to lie
on the table; as follows:
Strike titles I, II, IV, and V.
Strike section 601 and insert the following:
SEC. 601. SUNSET.
Except as otherwise provided, the provisions of, and
amendments made, by section 362 shall not apply to taxable
years beginning after December 31, 2012, and the Internal
Revenue Code of 1986 shall be applied and administered to
such years as if such amendments had never been enacted.
______
SA 608. Mr. DURBIN submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the appropriate place, insert the following:
SEC. ____. HEALTH CARE COVERAGE FOR CAREGIVERS
(a) In General.--The Public Health Service Act (42 U.S.C.
201 et seq.) is amended by adding at the end the following:
``TITLE XXIX--HEALTH CARE COVERAGE FOR CAREGIVERS
``SEC. 2901. PURPOSE; STATE PLANS.
``(a) Purpose.--The purpose of this title is to provide
funds to States to enable them to--
``(1) expand the availability of health insurance coverage
to those individuals involved in providing care for children,
the disabled, and the elderly; and
(2) provide incentives to attract and retain quality
caregivers.
``(b) State Plan Required.--A State is not eligible for
payment under section 2905 unless the State has submitted to
the Secretary under section 2906 a plan that--
``(1) sets forth how the State intends to use the funds
provided under this title to provide health insurance or
health care assistance through title XIX of the Social
Security Act, or other State or local health care assistance
or insurance programs, or to provide assistance through the
Federal Employees Health Benefits Program if permitted under
law, to eligible caregivers consistent with the provisions of
this title, and
``(2) has been approved under section 2906.
``(c) State Entitlement.--This title constitutes budget
authority in advance of appropriations Acts and represents
the obligation of the Federal Government to provide for the
payment to States of amounts provided under section 2904.
[[Page S6339]]
``(d) Effective Date.--No State is eligible for payments
under section 2905 for health care assistance for coverage
provided for periods beginning before October 1, 2003.
``SEC. 2902. GENERAL CONTENTS OF STATE PLAN; ELIGIBILITY;
OUTREACH.
``(a) General Background and Description.--A State plan
shall include a description, consistent with the requirements
of this title, of--
``(1) the extent to which, and manner in which, eligible
caregivers in the State, currently have creditable health
coverage (as defined in section 2910(c)(2));
``(2) current State efforts to provide or obtain creditable
health coverage for eligible caregivers, including the steps
the State is taking to identify and enroll all such
caregivers who are eligible to participate in public health
insurance programs and health insurance programs that involve
public-private partnerships;
``(3) how the plan is designed to be coordinated with such
efforts to increase coverage of such caregivers under
creditable health coverage;
``(4) the health care assistance provided under the plan
for eligible caregivers and the dependent children of such
caregivers, including the proposed methods of delivery, and
utilization control systems;
``(5) eligibility standards consistent with subsection (b);
``(6) outreach activities consistent with subsection (c);
and
``(7) methods (including monitoring) used--
``(A) to assure the quality and appropriateness of care
provided under the plan, and
``(B) to assure access to covered services, including
emergency services.
``(b) General Description of Eligibility Standards and
Methodology.--
``(1) Eligibility standards.--
``(A) In general.--The plan shall include a description of
the standards used to determine the eligibility of caregivers
for health care assistance under the plan. Such standards may
include (to the extent consistent with this title) those
relating to the geographic areas to be served by the plan,
age, income and resources (including any standards relating
to spenddowns and disposition of resources), residency,
disability status (so long as any standard relating to such
status does not restrict eligibility), access to or coverage
under other health coverage, and duration of eligibility.
Such standards may not discriminate on the basis of
diagnosis.
``(B) Limitations on eligibility standards.--Such
eligibility standards--
``(i) shall, within any defined group of covered eligible
caregivers, not cover such caregivers with a higher family
income without covering caregivers with a lower family
income, and
``(ii) may not deny eligibility based on a caregiver having
a preexisting medical condition.
``(2) Methodology.--The plan shall include a description of
methods of establishing and continuing eligibility and
enrollment.
``(3) Eligibility screening; coordination with other health
coverage programs.--The plan shall include a description of
procedures to be used to ensure--
``(A) through both intake and followup screening, that only
eligible caregivers are furnished health care assistance
under the State plan;
``(B) that eligible caregivers found through the screening
to be eligible for medical assistance under the State
medicaid plan under title XIX of the Social Security Act are
enrolled for such assistance under such plan;
``(C) that the insurance provided under the State plan does
not substitute for coverage under group health plans;
``(D) the provision of health care assistance to eligible
caregivers in the State who are Indians (as defined in
section 4(c) of the Indian Health Care Improvement Act (25
U.S.C. 1603(c))); and
``(E) coordination with other public and private programs
providing creditable coverage for eligible caregivers.
``(4) Nonentitlement.--Nothing in this title shall be
construed as providing an individual with an entitlement to
health care assistance under a State plan.
``(c) Outreach and Coordination.--A State plan shall
include a description of the procedures to be used by the
State to accomplish the following:
``(1) Outreach.--Outreach to caregivers likely to be
eligible for health care assistance under the plan or under
other public or private health coverage programs to inform
such care givers of the availability of, and to assist them
in enrolling in, such a program.
``(2) Coordination with other health insurance programs.--
Coordination of the administration of the State program under
this title with other public and private health insurance
programs.
``(d) Payment or Premiums.--Nothing in this title shall be
construed to prohibit a State from paying the eligible
caregiver's share of premiums required for health care
assistance provided to the caregiver under the State plan.
``SEC. 2903. COVERAGE REQUIREMENTS FOR HEALTH CARE
ASSISTANCE.
``The health care assistance provided to an eligible
caregiver under the plan in the form described in paragraph
(1) of section 2901(a) shall consist of any of the types of
coverage, the benchmark benefit packages, the categories of
services, existing programs, the cost sharing requirements,
and the preexisting condition limitations described in
section 2103 of the Social Security Act, and shall provide
coverage for the dependent children of the eligible
caregiver.
``SEC. 2904. ALLOTMENTS.
``(a) Appropriation.--For purpose of enabling States to
provide assistance under this title, there is appropriated,
out of any money in the Treasury not otherwise appropriated,
$3,500,000,000 for each of fiscal years 2004 through 2011.
``(b) Allotments to 50 States and District of Columbia.--
``(1) In general.--Of the amount available for allotment
under subsection (a) for a fiscal year, reduced by the amount
of allotments made under subsection (c) for such fiscal year,
the Secretary shall allot to each State an amount the bears
that same ratio to such available amount as the population of
the State in such fiscal year bears to the total populations
of all States in such fiscal year.
``(5) Adjustment for geographic variations in health
costs.--In making allotments under this subsection, the
Secretary shall adjust a State's allotment based on section
2104(b)(3) of the Social Security Act to reflect the
geographic variations in health costs.
``(c) Allotments to Territories.--
``(1) In general.--Of the amount available for allotment
under subsection (a) for a fiscal year, the Secretary shall
allot 0.25 percent among each of the commonwealths and
territories described in paragraph (3) in the same proportion
as the percentage specified in paragraph (2) for such
commonwealth or territory bears to the sum of such
percentages for all such commonwealths or territories so
described.
``(2) Percentage.--The percentage specified in this
paragraph for--
``(A) Puerto Rico is 91.6 percent,
``(B) Guam is 3.5 percent,
``(C) the Virgin Islands is 2.6 percent,
``(D) American Samoa is 1.2 percent, and
``(E) the Northern Mariana Islands is 1.1 percent.
``(3) Commonwealths and territories.--A commonwealth or
territory described in this paragraph is any of the following
if it has a State plan approved under this title:
``(A) Puerto Rico.
``(B) Guam.
``(C) The Virgin Islands.
``(D) American Samoa.
``(E) The Northern Mariana Islands.
``(d) 3-Year Availability of Amounts Allotted.--Amounts
allotted to a State pursuant to this section for a fiscal
year shall remain available for expenditure by the State
through the end of the second succeeding fiscal year; except
that amounts reallotted to a State under subsection (e) shall
be available for expenditure by the State through the end of
the fiscal year in which they are reallotted.
``(e) Procedure for Redistribution of Unused Allotments.--
The Secretary shall determine an appropriate procedure for
redistribution of allotments from States that were provided
allotments under this section for a fiscal year but that do
not expend all of the amount of such allotments during the
period in which such allotments are available for expenditure
under subsection (d), to States that have fully expended the
amount of their allotments under this section.
``SEC. 2905. PAYMENTS TO STATES.
``(a) In General.--Subject to the succeeding provisions of
this section, the Secretary shall pay to each State with a
plan approved under this title, from its allotment for a
fiscal year under section 2904, an amount for each quarter
equal to the enhanced FMAP of expenditures in the quarter--
``(1) for health care assistance under the plan for
eligible caregivers in the form of providing health benefits
coverage that meets the requirements of section 2903; and
``(2) only to the extent permitted consistent with
subsection (c)--
``(A) for payment for other health care assistance for such
caregivers;
``(B) for expenditures for health services initiatives
under the plan for improving the health of such caregivers;
``(C) for expenditures for outreach activities as provided
in section 2902(c)(1) under the plan; and
``(D) for other reasonable costs incurred by the State to
administer the plan.
``(b) Enhanced FMAP.--For purposes of subsection (a), the
`enhanced FMAP', for a State for a fiscal year, is equal to
the Federal medical assistance percentage (as defined in the
first sentence of section 1905(b) of the Social Security Act)
for the State increased by a number of percentage points
equal to 30 percent of the number of percentage points by
which (1) such Federal medical assistance percentage for the
State, is less than (2) 100 percent; but in no case shall the
enhanced FMAP for a State exceed 85 percent.
``(c) Limitation on Certain Payments for Certain
Expenditures.--
``(1) General limitations.--Funds provided to a State under
this title shall only be used to carry out the purposes of
this title (as described in section 2901).
``(2) Use of non-federal funds for state matching
requirement.--Amounts provided by the Federal Government, or
services assisted or subsidized to any significant extent by
the Federal Government, may not be included in determining
the amount of non-Federal contributions required under
subsection (a).
``(3) Offset of receipts attributable to premiums and other
cost-sharing.--For
[[Page S6340]]
purposes of subsection (a), the amount of the expenditures
under the plan shall be reduced by the amount of any premiums
and other cost-sharing received by the State.
``(4) Prevention of duplicative payments.--
``(A) Other health plans.--No payment shall be made to a
State under this section for expenditures for health care
assistance provided for an eligible caregiver under its plan
to the extent that a private insurer (as defined by the
Secretary by regulation and including a group health plan (as
defined in section 607(1) of the Employee Retirement Income
Security Act of 1974), a service benefit plan, and a health
maintenance organization) would have been obligated to
provide such assistance but for a provision of its insurance
contract which has the effect of limiting or excluding such
obligation because the individual is eligible for or is
provided health care assistance under the plan.
``(B) Other federal governmental programs.--Except as
otherwise provided by law, no payment shall be made to a
State under this section for expenditures for health care
assistance provided for an eligible caregiver under its plan
to the extent that payment has been made or can reasonably be
expected to be made promptly (as determined in accordance
with regulations) under any other federally operated or
financed health care insurance program, other than an
insurance program operated or financed by the Indian Health
Service, as identified by the Secretary. For purposes of this
paragraph, rules similar to the rules for overpayments under
section 1903(d)(2) of the Social Security Act shall apply.
``(d) Maintenance of Effort.--
``(1) In medicaid eligibility standards.--No payment may be
made under subsection (a) with respect to health care
assistance provided under a State plan if the State adopts
income and resource standards and methodologies for purposes
of determining a caregiver's eligibility for medical
assistance under the State plan under title XIX of the Social
Security Act that are more restrictive than those applied as
of June 1, 1997.
``(2) In amounts of payment expended for certain state-
funded health insurance programs.--
``(A) In general.--The amount of the allotment for a State
in a fiscal year (beginning with fiscal year 2004) shall be
reduced by the amount by which--
``(i) the total of the State health insurance expenditures
for caregivers in the preceding fiscal year, is less than
``(ii) the total of such expenditures in fiscal year 2003.
``(B) State health insurance expenditures for caregivers.--
The term `State health insurance expenditures for caregivers'
means the following:
``(i) The State share of expenditures under this title.
``(ii) The State share of expenditures under title XIX of
the Social Security Act that are attributable to an enhanced
FMAP under section 1905(u) of such Act.
``(iii) State expenditures under health benefits coverage
under an existing comprehensive State-based program.
``(e) Advance Payment; Retrospective Adjustment.--The
Secretary may make payments under this section for each
quarter on the basis of advance estimates of expenditures
submitted by the State and such other investigation as the
Secretary may find necessary, and may reduce or increase the
payments as necessary to adjust for any overpayment or
underpayment for prior quarters.
``(f) Flexibility in Submittal of Claims.--Nothing in this
section or subsections (d) and (e) of section 2904 shall be
construed as preventing a State from claiming as expenditures
in the quarter expenditures that were incurred in a previous
quarter.
``SEC. 2906. PROCESS FOR SUBMISSION, APPROVAL, AND AMENDMENT
OF STATE PLANS.
``(a) Initial Plan.--
``(1) In general.--As a condition of receiving payment
under section 2905, a State shall submit to the Secretary a
State plan that meets the applicable requirements of this
title.
``(2) Approval.--Except as the Secretary may provide under
subsection (e), a State plan submitted under paragraph (1)--
``(A) shall be approved for purposes of this title, and
``(B) shall be effective beginning with a calendar quarter
that is specified in the plan, but in no case earlier than
October 1, 2003.
``(b) Plan Amendments.--The provisions of section 2106(b)
of the Social Security Act shall apply with respect to the
amendment of a State plan under this title.
``(c) Disapproval of Plans and Plan Amendments.--
``(1) Prompt review of plan submittals.--The Secretary
shall promptly review State plans and plan amendments
submitted under this section to determine if they
substantially comply with the requirements of this title.
``(2) 90-day approval deadlines.--A State plan or plan
amendment is considered approved unless the Secretary
notifies the State in writing, within 90 days after receipt
of the plan or amendment, that the plan or amendment is
disapproved (and the reasons for disapproval) or that
specified additional information is needed.
``(3) Correction.--In the case of a disapproval of a plan
or plan amendment, the Secretary shall provide a State with a
reasonable opportunity for correction before taking financial
sanctions against the State on the basis of such disapproval.
``(d) Program Operation.--
``(1) In general.--The State shall conduct the program in
accordance with the plan (and any amendments) approved under
subsection (c) and with the requirements of this title.
``(2) Violations.--The Secretary shall establish a process
for enforcing requirements under this title. Such process
shall provide for the withholding of funds in the case of
substantial noncompliance with such requirements. In the case
of an enforcement action against a State under this
paragraph, the Secretary shall provide a State with a
reasonable opportunity for correction before taking financial
sanctions against the State on the basis of such an action.
``(e) Continued Approval.--An approved State caregivers
health plan shall continue in effect unless and until the
State amends the plan under subsection (b) or the Secretary
finds, under subsection (d), substantial noncompliance of the
plan with the requirements of this title.
``SEC. 2907. STRATEGIC OBJECTIVES AND PERFORMANCE GOALS; PLAN
ADMINISTRATION.
``(a) Strategic Objectives and Performance Goals.--
``(1) Description.--A State plan shall include a
description of--
``(A) the strategic objectives,
``(B) the performance goals, and
``(C) the performance measures,
the State has established for providing health care
assistance to eligible caregivers under the plan and
otherwise for maximizing health benefits coverage for other
caregivers generally in the State.
``(2) Strategic objectives.--Such plan shall identify
specific strategic objectives relating to increasing the
extent of creditable health coverage among eligible
caregivers.
``(3) Performance goals.--Such plan shall specify 1 or more
performance goals for each such strategic objective so
identified.
``(4) Performance measures.--Such plan shall describe how
performance under the plan will be--
``(A) measured through objective, independently verifiable
means, and
``(B) compared against performance goals, in order to
determine the State's performance under this title.
``(b) Records, Reports, Audits, and Evaluation.--
``(1) Data collection, records, and reports.--A State plan
shall include an assurance that the State will collect the
data, maintain the records, and furnish the reports to the
Secretary, at the times and in the standardized format the
Secretary may require in order to enable the Secretary to
monitor State program administration and compliance and to
evaluate and compare the effectiveness of State plans under
this title.
``(2) State assessment and study.--A State plan shall
include a description of the State's plan for the annual
assessments and reports under section 2908(a) and the
evaluation required by section 2908(b).
``(3) Audits.--A State plan shall include an assurance that
the State will afford the Secretary access to any records or
information relating to the plan for the purposes of review
or audit.
``(c) Program Development Process.--A State plan shall
include a description of the process used to involve the
public in the design and implementation of the plan and the
method for ensuring ongoing public involvement.
``(d) Program Budget.--A State plan shall include a
description of the budget for the plan. The description shall
be updated periodically as necessary and shall include
details on the planned use of funds and the sources of the
non-Federal share of plan expenditures, including any
requirements for cost-sharing by beneficiaries.
``(e) Application of Certain General Provisions.--The
following sections of the Social Security Act shall apply to
States under this title in the same manner as they apply to a
State under title XIX or title XI of such Act, as
appropriate:
``(1) Title xix provisions.--
``(A) Section 1902(a)(4)(C) (relating to conflict of
interest standards).
``(B) Paragraphs (2), (16), and (17) of section 1903(i)
(relating to limitations on payment).
``(C) Section 1903(w) (relating to limitations on provider
taxes and donations).
``(2) Title xi provisions.--
``(A) Section 1115 (relating to waiver authority).
``(B) Section 1116 (relating to administrative and judicial
review), but only insofar as consistent with this title.
``(C) Section 1124 (relating to disclosure of ownership and
related information).
``(D) Section 1126 (relating to disclosure of information
about certain convicted individuals).
``(E) Section 1128A (relating to civil monetary penalties).
``(F) Section 1128B(d) (relating to criminal penalties for
certain additional charges).
``(G) Section 1132 (relating to periods within which claims
must be filed).
``SEC. 2908. ANNUAL REPORTS; EVALUATIONS.
``(a) Annual Report.--The State shall--
``(1) assess the operation of the State plan under this
title in each fiscal year, including the progress made in
reducing the number of uncovered eligible caregivers; and
``(2) report to the Secretary, by January 1 following the
end of the fiscal year, on the result of the assessment.
``(b) State Evaluations.--
[[Page S6341]]
``(1) In general.--By March 31, 2005, each State that has a
State plan shall submit to the Secretary an evaluation that
includes each of the following:
``(A) An assessment of the effectiveness of the State plan
in increasing the number of caregivers with creditable health
coverage.
``(B) A description and analysis of the effectiveness of
elements of the State plan, including--
``(i) the characteristics of the caregivers assisted under
the State plan including family income, and the assisted
caregiver's access to or coverage by other health insurance
prior to the State plan and after eligibility for the State
plan ends,
``(ii) the quality of health coverage provided including
the types of benefits provided,
``(iii) the amount and level (including payment of part or
all of any premium) of assistance provided by the State,
``(iv) the service area of the State plan,
``(v) the time limits for coverage of a caregiver under the
State plan,
``(vi) the State's choice of health benefits coverage and
other methods used for providing health care assistance, and
``(vii) the sources of non-Federal funding used in the
State plan.
``(C) An assessment of the effectiveness of other public
and private programs in the State in increasing the
availability of affordable quality individual and family
health insurance for caregivers.
``(D) A review and assessment of State activities to
coordinate the plan under this title with other public and
private programs providing health care and health care
financing, including medicaid and maternal and child health
services.
``(E) An analysis of changes and trends in the State that
affect the provision of accessible, affordable, quality
health insurance and health care to caregivers.
``(F) A description of any plans the State has for
improving the availability of health insurance and health
care for caregivers.
``(G) Recommendations for improving the program under this
title.
``(H) Any other matters the State and the Secretary
consider appropriate.
``(2) Report of the secretary.--The Secretary shall submit
to Congress and make available to the public by December 31,
2005, a report based on the evaluations submitted by States
under paragraph (1), containing any conclusions and
recommendations the Secretary considers appropriate.
``SEC. 2909. MISCELLANEOUS PROVISIONS.
``(a) HIPAA.--Health benefits coverage provided under
section 2901(a)(1) shall be treated as creditable coverage
for purposes of part 7 of subtitle B of title I of the
Employee Retirement Income Security Act of 1974, title XXVII
of the Public Health Service Act, and subtitle K of the
Internal Revenue Code of 1986.
``(b) ERISA.--Nothing in this title shall be construed as
affecting or modifying section 514 of the Employee Retirement
Income Security Act of 1974 with respect to a group health
plan (as defined in section 2791(a)(1) of this Act.
``(c) Limitation on Entities.--Notwithstanding any other
provision of this title, a State may limit the application of
this title to eligible caregivers who are employed by
entities that provide services to a specific percentage of
individuals who receive assistance under, or through, Federal
or State assistance programs.
``SEC. 2910. DEFINITIONS.
(a) Health Care Assistance.--For purposes of this title,
the term `health care assistance' means payment for part or
all of the cost of health benefits coverage for eligible
caregivers (and the dependent children of such caregivers)
that includes any of the following (and includes, in the case
described in section 2905(a)(2)(A), payment for part or all
of the cost of providing any of the following), as specified
under the State plan:
``(1) Inpatient hospital services.
``(2) Outpatient hospital services.
``(3) Physician services.
``(4) Surgical services.
``(5) Clinic services (including health center services)
and other ambulatory health care services.
``(6) Prescription drugs and biologicals and the
administration of such drugs and biologicals, only if such
drugs and biologicals are not furnished for the purpose of
causing, or assisting in causing, the death, suicide,
euthanasia, or mercy killing of a person.
``(7) Over-the-counter medications.
``(8) Laboratory and radiological services.
``(9) Prenatal care and prepregnancy family planning
services and supplies.
``(10) Inpatient mental health services, other than
services described in paragraph (18) but including services
furnished in a State-operated mental hospital and including
residential or other 24-hour therapeutically planned
structured services.
``(11) Outpatient mental health services, other than
services described in paragraph (19) but including services
furnished in a State-operated mental hospital and including
community-based services.
``(12) Durable medical equipment and other medically-
related or remedial devices (such as prosthetic devices,
implants, eyeglasses, hearing aids, dental devices, and
adaptive devices).
``(13) Disposable medical supplies.
``(14) Home and community-based health care services and
related supportive services (such as home health nursing
services, home health aide services, personal care,
assistance with activities of daily living, chore services,
day care services, respite care services, training for family
members, and minor modifications to the home).
``(15) Nursing care services (such as nurse practitioner
services, nurse midwife services, advanced practice nurse
services, private duty nursing care, pediatric nurse
services, and respiratory care services) in a home, school,
or other setting.
``(16) Dental services.
``(17) Inpatient substance abuse treatment services and
residential substance abuse treatment services.
``(18) Outpatient substance abuse treatment services.
``(19) Case management services.
``(20) Care coordination services.
``(21) Physical therapy, occupational therapy, and services
for individuals with speech, hearing, and language disorders.
``(22) Hospice care.
``(23) Any other medical, diagnostic, screening,
preventive, restorative, remedial, therapeutic, or
rehabilitative services (whether in a facility, home, school,
or other setting) if recognized by State law and only if the
service is--
``(A) prescribed by or furnished by a physician or other
licensed or registered practitioner within the scope of
practice as defined by State law,
``(B) performed under the general supervision or at the
direction of a physician, or
``(C) furnished by a health care facility that is operated
by a State or local government or is licensed under State law
and operating within the scope of the license.
``(24) Premiums for private health care insurance coverage.
``(25) Medical transportation.
``(26) Enabling services (such as transportation,
translation, and outreach services) only if designed to
increase the accessibility of primary and preventive health
care services for eligible low-income individuals.
``(27) Any other health care services or items specified by
the Secretary and not excluded under this section.
``(b) Eligible Caregiver Defined.--For purposes of this
title, the term `eligible caregiver' means an individual--
``(1) who has been determined eligible by the State under
this title for assistance under the State plan;
``(2) who--
``(A) subject to section 2909(c)--
``(i) is employed as a child care provider, an adult day
care provider, a personal attendant for disabled individuals,
a nursing home aide, a home health aide, or in any other
caregiving position determined appropriate by the State, with
an entity that is licensed or certified under State law, or
is otherwise providing services under a State license or
certification; and
``(ii) is certified by, or enrolled in, an accredited
program recognized by the State as having received training
necessary in order to be employed in a position described in
subparagraph (A); or
``(B)(i) is providing caregiver services on a full-time
basis for a relative; and
``(ii) does not otherwise have access to employer-sponsored
health insurance coverage;
``(3) who is not found to be eligible for medical
assistance under title XIX of the Social Security Act or
covered under a group health plan or under health insurance
coverage (as such terms are defined in section 2791 of this
Act); and
``(4) who meets any other criteria determined appropriate
by the State.
``(c) Additional Definitions.--For purposes of this title:
``(1) Creditable health coverage.--The term `creditable
health coverage' has the meaning given the term `creditable
coverage' under section 2701(c) of this Act and includes
coverage that meets the requirements of section 2903 provided
to an eligible caregiver under this title.
``(2) Group health plan; health insurance coverage; etc.--
The terms `group health plan', `group health insurance
coverage', and `health insurance coverage' have the meanings
given such terms in section 2791 of this Act.
``(3) Poverty line defined.--The term `poverty line' has
the meaning given such term in section 673(2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2)),
including any revision required by such section.
``(4) Preexisting condition exclusion.--The term
`preexisting condition exclusion' has the meaning given such
term in section 2701(b)(1)(A) of this Act.
``(5) State plan; plan.--Unless the context otherwise
requires, the terms `State plan' and `plan' mean a State plan
approved under section 2906.''.
(b) Elimination of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar years 2003, 2004, and 2005, the following
percentages shall be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004 and 2005, 37.6%.
______
SA 609. Mr. DURBIN submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201
[[Page S6342]]
of the concurrent resolution on the budget for fiscal year 2004; which
was ordered to lie on the table; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. EXTENSION OF MINIMUM TAX RELIEF.
(a) Extension of Minimum Tax Relief.--
(1) In general.--Paragraph (1) of section 55(d) (relating
to exemption amount for taxpayers other than corporations),
as amended by section 103 of this Act, is amended--
(A) in the table in subparagraph (A)--
(i) by striking ``In 2003, 2004, and 2005'' and inserting
``After 2002'', and
(ii) by striking the last row (relating to the exemption
amount in taxable years beginning after 2005) and inserting a
period after ``$61,000'', and
(B) in the table in subparagraph (B)--
(i) by striking ``In 2003, 2004, and 2005'' and inserting
``After 2002'', and
(ii) by striking the last row (relating to the exemption
amount in taxable years beginning after 2005) and inserting a
period after ``$41,750''.
(2) Inflation adjustments.--Subsection (d) of section 55 is
amended by inserting at the end the following new paragraph:
``(4) Inflation Adjustment.--
``(A) In general.--In the case of a taxable year beginning
after 2005, the $61,000 amount in paragraph (1)(A) and the
$41,750 amount in paragraph (1)(B) shall each be increased by
an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2005'
for calendar year `1992' in subparagraph (B) thereof.
``(B) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $50, such amount shall
be rounded to the next lowest multiple of $50.''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years beginning after December 31,
2002 and before January 1, 2010.
(b) Freeze of Top Income Rate.--
(1) In general.--The table in paragraph (2) of section 1(i)
(relating to reductions in rates after June 30, 2001), as
amended by section 102 of this Act, is amended by striking
``35.0%'' in the last column and inserting ``38.6%''.
(2) Effective date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
(c) Repeal of Partial Exclusion of Dividends Received by
Individuals.--The amendments made by section 201 of this Act
are repealed.
(d) Application of EGTRRA.--The amendments made by
subsections (a) and (b) shall be subject to title IX of the
Economic Growth and Tax Relief Reconciliation Act of 2001 to
the same extent and in the same manner as the provision of
such Act to which such amendment relates.
______
SA 610. Mr. DURBIN submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of end of subtitle C of title V, add the
following:
SEC. ____. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits) is amended
by adding at the end the following:
``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the
case of a small employer, the employee health insurance
expenses credit determined under this section is an amount
equal to the sum of--
``(1) the expense amount described in subsection (b), and
``(2) the expense amount described in subsection (c),
paid by the taxpayer during the taxable year.
``(b) Subsection (b) Expense Amount.--For purposes of this
section--
``(1) In general.--The expense amount described in this
subsection is the applicable percentage of the amount of
qualified employee health insurance expenses of each
qualified employee.
``(2) Applicable percentage.--For purposes of paragraph
(1), the applicable percentage is equal to--
``(A) 25 percent in the case of self-only coverage, and
``(B) 35 percent in the case of family coverage (as defined
in section 220(c)(5)).
``(3) Per employee dollar limitation.--The amount of
qualified employee health insurance expenses taken into
account under paragraph (1) with respect to any qualified
employee for any taxable year shall not exceed--
``(A) $750 in the case of self-only coverage, and
``(B) $2,450 in the case of family coverage (as so
defined).
``(c) Subsection (c) Expense Amount.--For purposes of this
section--
``(1) In general.--The expense amount described in this
subsection is, with respect to any taxable year during which
a small employer pays qualified employee health insurance
expenses for the applicable coverage percentage of the
eligible qualified employees of the small employer, the
applicable percentage of the amount of qualified employee
health insurance expenses of each qualified employee.
``(2) Applicable coverage percentage; applicable
percentage.--For purposes of paragraph (1), the applicable
coverage percentage and applicable percentage shall be
determined under the following table:
``Applicable coverage percentage: Applicable
percentage:
At least 70 but not more than 80 percent.................10 percent....
At least 80 but not more than 90 percent.................15 percent....
At least 90 percent......................................20 percent....
``(3) Eligible qualified employee.--For purposes of
paragraph (1), the term `eligible qualified employee' means
any qualified employee who is not provided health insurance
coverage during the taxable year under--
``(A) a health plan of the employee's spouse,
``(B) title XVIII, XIX, or XXI of the Social Security Act,
``(C) chapter 17 of title 38, United States Code,
``(D) chapter 55 of title 10, United States Code,
``(E) chapter 89 of title 5, United States Code,
``(F) the Indian Health Care Improvement Act, or
``(G) any other provision of law.
``(d) Limitation Based on Wages.--
``(1) In general.--The percentage which would (but for this
subsection) be taken into account as the applicable
percentage for purposes of subsection (b)(2) or (c)(2) for
the taxable year shall be reduced (but not below zero) by the
percentage determined under paragraph (2).
``(2) Amount of reduction.--The percentage determined under
this paragraph is the percentage which bears the same ratio
to the percentage which would be so taken into account
as--
``(A) the excess of--
``(i) the qualified employee's wages at an annual rate
during such taxable year, over
``(ii) $20,000, bears to
``(B) $5,000.
``(e) Definitions.--For purposes of this section--
``(1) Small employer.--
``(A) In general.--The term `small employer' means, with
respect to any calendar year, any employer if such employer
employed an average of 25 or fewer employees on business days
during either of the 2 preceding calendar years. For purposes
of the preceding sentence, a preceding calendar year may be
taken into account only if the employer was in existence
throughout such year.
``(B) Employers not in existence in preceding year.--In the
case of an employer which was not in existence throughout the
1st preceding calendar year, the determination under
subparagraph (A) shall be based on the average number of
employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee health
insurance expenses' means any amount paid by an employer for
health insurance coverage to the extent such amount is
attributable to coverage provided to any employee while such
employee is a qualified employee.
``(B) Exception for amounts paid under salary reduction
arrangements.--No amount paid or incurred for health
insurance coverage pursuant to a salary reduction arrangement
shall be taken into account under subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
section 9832(b)(1).
``(3) Qualified employee.--
``(A) In general.--The term `qualified employee' means,
with respect to any period, an employee of an employer if the
total amount of wages paid or incurred by such employer to
such employee at an annual rate during the taxable year
exceeds $5,000 but does not exceed $25,000.
``(B) Treatment of certain employees.--For purposes of
subparagraph (A), the term `employee'--
``(i) shall not include an employee within the meaning of
section 401(c)(1), and
``(ii) shall include a leased employee within the meaning
of section 414(n).
``(C) Wages.--The term `wages' has the meaning given such
term by section 3121(a) (determined without regard to any
dollar limitation contained in such section).
``(D) Inflation adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, the $25,000 amount
contained in subparagraph (A) shall be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment under section 1(f)(3)
for the calendar year in which
[[Page S6343]]
the taxable year begins, determined by substituting `calendar
year 2002' for `calendar year 1992' in subparagraph (B)
thereof.
``(ii) Rounding.--If any increase determined under clause
(i) is not a multiple of $100, such amount shall be rounded
to the nearest multiple of $100.
``(f) Certain Rules Made Applicable.--For purposes of this
section, rules similar to the rules of section 52 shall
apply.
``(g) Denial of Double Benefit.--No deduction or other
credit under any other provision of this chapter shall be
allowed for that portion of the qualified employee health
insurance expenses paid for the taxable year which is equal
to the credit determined under subsection (a).''.
(b) Credit To Be Part of General Business Credit.--Section
38(b) (relating to current year business credit) is amended
by striking ``plus'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following:
``(16) the employee health insurance expenses credit
determined under section 45G.''.
(c) No Carrybacks.--Subsection (d) of section 39 (relating
to carryback and carryforward of unused credits) is amended
by adding at the end the following:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the employee health
insurance expenses credit determined under section 45G may be
carried back to a taxable year ending before the date of the
enactment of section 45G.''.
(d) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
adding at the end the following:
``Sec. 45G. Employee health insurance expenses.''.
(e) Delay in Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar year 2003, ``38.6%'' shall be substituted for
``35%'' and for taxable years beginning during calendar year
2004, ``37.6%'' shall be substituted for ``35%''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to amounts paid
or incurred in taxable years beginning after December 31,
2002.
(2) Subsection (e).--Subsection (e) shall apply to taxable
years beginning after December 31, 2002.
______
SA 611. Mr. CONRAD proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
Strike page 14, line 8 through page 15, line 11, and insert
the following:
``(d) No Interest.--No interest shall be allowed on any
overpayment attributable to this section.''.
(2) Clerical amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end
the following new item:
``Sec. 6429. Advance payment of portion of increased child credit for
2003.''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Subsections (a) and (c).--
(A) The amendment made by subsection (a) shall apply to
taxable years beginning after December 31, 2001.
(B) The amendments made by subsection (c) shall take effect
on the date of the enactment of this Act.
Strike the first table on page 8 and insert the following:
------------------------------------------------------------------------
The corresponding percentages shall be
substituted for the following
``In the case of taxable years percentages:
beginning during calendar year: ----------------------------------------
28% 31% 36% 39.6%
------------------------------------------------------------------------
2001........................... 27.5% 30.5% 35.5% 39.1%
2002........................... 27.0% 30.0% 35.0% 38.6%
2003........................... 25.0% 28.0% 33.0% 38.6%
2004........................... 25.0% 28.0% 33.0% 37.6%
2005........................... 25.0% 28.0% 33.0% 35.0%
2006 and thereafter............ 25.0% 28.0% 33.0% 35.0%''.
------------------------------------------------------------------------
______
SA 612. Mr. BAUCUS (for Mr. McCain (for himself and Mr. Baucus))
proposed an amendment to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; as follows:
At the appropriate place, insert the following:
TITLE VI--IMPROVING TAX EQUITY FOR MILITARY PERSONNEL
SEC. 600. SHORT TITLE.
This title may be cited as the ``Armed Forces Tax Fairness
Act of 2003''.
SEC. 601. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL
RESIDENCE BY A MEMBER OF THE UNIFORMED SERVICES
OR THE FOREIGN SERVICE.
(a) In General.--Subsection (d) of section 121 (relating to
exclusion of gain from sale of principal residence) is
amended by redesignating paragraph (9) as paragraph (10) and
by inserting after paragraph (8) the following new paragraph:
``(9) Members of uniformed services and foreign service.--
``(A) In general.--At the election of an individual with
respect to a property, the running of the 5-year period
described in subsections (a) and (c)(1)(B) and paragraph (7)
of this subsection with respect to such property shall be
suspended during any period that such individual or such
individual's spouse is serving on qualified official extended
duty as a member of the uniformed services or of the Foreign
Service of the United States.
``(B) Maximum period of suspension.--The 5-year period
described in subsection (a) shall not be extended more than
10 years by reason of subparagraph (A).
``(C) Qualified official extended duty.--For purposes of
this paragraph--
``(i) In general.--The term `qualified official extended
duty' means any extended duty while serving at a duty station
which is at least 50 miles from such property or while
residing under Government orders in Government quarters.
``(ii) Uniformed services.--The term `uniformed services'
has the meaning given such term by section 101(a)(5) of title
10, United States Code, as in effect on the date of the
enactment of this paragraph.
``(iii) Foreign service of the united states.--The term
`member of the Foreign Service of the United States' has the
meaning given the term `member of the Service' by paragraph
(1), (2), (3), (4), or (5) of section 103 of the Foreign
Service Act of 1980, as in effect on the date of the
enactment of this paragraph.
``(iv) Extended duty.--The term `extended duty' means any
period of active duty pursuant to a call or order to such
duty for a period in excess of 90 days or for an indefinite
period.
``(D) Special rules relating to election.--
``(i) Election limited to 1 property at a time.--An
election under subparagraph (A) with respect to any property
may not be made if such an election is in effect with respect
to any other property.
``(ii) Revocation of election.--An election under
subparagraph (A) may be revoked at any time.''.
(b) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall take effect as if included in the amendments made by
section 312 of the Taxpayer Relief Act of 1997.
(2) Waiver of limitations.--If refund or credit of any
overpayment of tax resulting from the amendments made by this
section is prevented at any time before the close of the 1-
year period beginning on the date of the enactment of this
Act by the operation of any law or rule of law (including res
judicata), such refund or credit may nevertheless be made or
allowed if claim therefor is filed before the close of such
period.
SEC. 602. EXCLUSION FROM GROSS INCOME OF CERTAIN DEATH
GRATUITY PAYMENTS.
(a) In General.--Subsection (b)(3) of section 134 (relating
to certain military benefits) is amended by adding at the end
the following new subparagraph:
``(C) Exception for death gratuity adjustments made by
law.--Subparagraph (A) shall not apply to any adjustment to
the amount of death gratuity payable under chapter 75 of
title 10, United States Code, which is pursuant to a
provision of law enacted after September 9, 1986.''.
(b) Conforming Amendment.--Subparagraph (A) of section
134(b)(3) is amended by striking ``subparagraph (B)'' and
inserting ``subparagraphs (B) and (C)''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to deaths occurring after September
10, 2001.
SEC. 603. EXCLUSION FOR AMOUNTS RECEIVED UNDER DEPARTMENT OF
DEFENSE HOMEOWNERS ASSISTANCE PROGRAM.
(a) In General.--Section 132(a) (relating to the exclusion
from gross income of certain fringe benefits) is amended by
striking ``or'' at the end of paragraph (6), by striking the
period at the end of paragraph (7) and inserting ``, or'',
and by adding at the end the following new paragraph:
``(8) qualified military base realignment and closure
fringe.''.
(b) Qualified Military Base Realignment and Closure
Fringe.--Section 132 is amended by redesignating subsection
(n) as subsection (o) and by inserting after subsection (m)
the following new subsection:
``(n) Qualified Military Base Realignment and Closure
Fringe.--For purposes of this section--
``(1) In general.--The term `qualified military base
realignment and closure fringe' means 1 or more payments
under the authority of section 1013 of the Demonstration
Cities and Metropolitan Development Act of 1966 (42 U.S.C.
3374) (as in effect on the date of the enactment of this
subsection) to offset the adverse effects on housing values
as a result of a military base realignment or closure.
``(2) Limitation.--With respect to any property, such term
shall not include any payment referred to in paragraph (1) to
the extent that the sum of all of such payments related to
such property exceeds the maximum amount described in clause
(1) of subsection (c) of such section (as in effect on such
date).''.
[[Page S6344]]
(c) Effective Date.--The amendments made by this section
shall apply to payments made after the date of the enactment
of this Act.
SEC. 604. EXPANSION OF COMBAT ZONE FILING RULES TO
CONTINGENCY OPERATIONS.
(a) In General.--Section 7508(a) (relating to time for
performing certain acts postponed by reason of service in
combat zone) is amended--
(1) by inserting ``, or when deployed outside the United
States away from the individual's permanent duty station
while participating in an operation designated by the
Secretary of Defense as a contingency operation (as defined
in section 101(a)(13) of title 10, United States Code) or
which became such a contingency operation by operation of
law'' after ``section 112'',
(2) by inserting in the first sentence ``or at any time
during the period of such contingency operation'' after ``for
purposes of such section'',
(3) by inserting ``or operation'' after ``such an area'',
and
(4) by inserting ``or operation'' after ``such area''.
(b) Conforming Amendments.--
(1) Section 7508(d) is amended by inserting ``or
contingency operation'' after ``area''.
(2) The heading for section 7508 is amended by inserting
``OR CONTINGENCY OPERATION'' after ``COMBAT ZONE''.
(3) The item relating to section 7508 in the table of
sections for chapter 77 is amended by inserting ``or
contingency operation'' after ``combat zone''.
(c) Effective Date.--The amendments made by this section
shall apply to any period for performing an act which has not
expired before the date of the enactment of this Act.
SEC. 605. MODIFICATION OF MEMBERSHIP REQUIREMENT FOR
EXEMPTION FROM TAX FOR CERTAIN VETERANS'
ORGANIZATIONS.
(a) In General.--Subparagraph (B) of section 501(c)(19)
(relating to list of exempt organizations) is amended by
striking ``or widowers'' and inserting ``, widowers,
ancestors, or lineal descendants''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 606. CLARIFICATION OF THE TREATMENT OF CERTAIN DEPENDENT
CARE ASSISTANCE PROGRAMS.
(a) In General.--Section 134(b) (defining qualified
military benefit) is amended by adding at the end the
following new paragraph:
``(4) Clarification of certain benefits.--For purposes of
paragraph (1), such term includes any dependent care
assistance program (as in effect on the date of the enactment
of this paragraph) for any individual described in paragraph
(1)(A).''.
(b) Conforming Amendments.--
(1) Section 134(b)(3)(A), as amended by section 102, is
amended by inserting ``and paragraph (4)'' after
``subparagraphs (B) and (C)''.
(2) Section 3121(a)(18) is amended by striking ``or 129''
and inserting ``, 129, or 134(b)(4)''.
(3) Section 3306(b)(13) is amended by striking ``or 129''
and inserting ``, 129, or 134(b)(4)''.
(4) Section 3401(a)(18) is amended by striking ``or 129''
and inserting ``, 129, or 134(b)(4)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
(d) No Inference.--No inference may be drawn from the
amendments made by this section with respect to the tax
treatment of any amounts under the program described in
section 134(b)(4) of the Internal Revenue Code of 1986 (as
added by this section) for any taxable year beginning before
January 1, 2003.
SEC. 607. CLARIFICATION RELATING TO EXCEPTION FROM ADDITIONAL
TAX ON CERTAIN DISTRIBUTIONS FROM QUALIFIED
TUITION PROGRAMS, ETC. ON ACCOUNT OF ATTENDANCE
AT MILITARY ACADEMY.
(a) In General.--Subparagraph (B) of section 530(d)(4)
(relating to exceptions from additional tax for distributions
not used for educational purposes) is amended by striking
``or'' at the end of clause (iii), by redesignating clause
(iv) as clause (v), and by inserting after clause (iii) the
following new clause:
``(iv) made on account of the attendance of the designated
beneficiary at the United States Military Academy, the United
States Naval Academy, the United States Air Force Academy,
the United States Coast Guard Academy, or the United States
Merchant Marine Academy, to the extent that the amount of the
payment or distribution does not exceed the costs of advanced
education (as defined by section 2005(e)(3) of title 10,
United States Code, as in effect on the date of the enactment
of this section) attributable to such attendance, or''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 608. SUSPENSION OF TAX-EXEMPT STATUS OF TERRORIST
ORGANIZATIONS.
(a) In General.--Section 501 (relating to exemption from
tax on corporations, certain trusts, etc.) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Suspension of Tax-Exempt Status of Terrorist
Organizations.--
``(1) In general.--The exemption from tax under subsection
(a) with respect to any organization described in paragraph
(2), and the eligibility of any organization described in
paragraph (2) to apply for recognition of exemption under
subsection (a), shall be suspended during the period
described in paragraph (3).
``(2) Terrorist organizations.--An organization is
described in this paragraph if such organization is
designated or otherwise individually identified--
``(A) under section 212(a)(3)(B)(vi)(II) or 219 of the
Immigration and Nationality Act as a terrorist organization
or foreign terrorist organization,
``(B) in or pursuant to an Executive order which is related
to terrorism and issued under the authority of the
International Emergency Economic Powers Act or section 5 of
the United Nations Participation Act of 1945 for the purpose
of imposing on such organization an economic or other
sanction, or
``(C) in or pursuant to an Executive order issued under the
authority of any Federal law if--
``(i) the organization is designated or otherwise
individually identified in or pursuant to such Executive
order as supporting or engaging in terrorist activity (as
defined in section 212(a)(3)(B) of the Immigration and
Nationality Act) or supporting terrorism (as defined in
section 140(d)(2) of the Foreign Relations Authorization Act,
Fiscal Years 1988 and 1989); and
``(ii) such Executive order refers to this subsection.
``(3) Period of suspension.--With respect to any
organization described in paragraph (2), the period of
suspension--
``(A) begins on the later of--
``(i) the date of the first publication of a designation or
identification described in paragraph (2) with respect to
such organization, or
``(ii) the date of the enactment of this subsection, and
``(B) ends on the first date that all designations and
identifications described in paragraph (2) with respect to
such organization are rescinded pursuant to the law or
Executive order under which such designation or
identification was made.
``(4) Denial of deduction.--No deduction shall be allowed
under any provision of this title, including sections 170,
545(b)(2), 556(b)(2), 642(c), 2055, 2106(a)(2), and 2522,
with respect to any contribution to an organization described
in paragraph (2) during the period described in paragraph
(3).
``(5) Denial of administrative or judicial challenge of
suspension or denial of deduction.--Notwithstanding section
7428 or any other provision of law, no organization or other
person may challenge a suspension under paragraph (1), a
designation or identification described in paragraph (2), the
period of suspension described in paragraph (3), or a denial
of a deduction under paragraph (4) in any administrative or
judicial proceeding relating to the Federal tax liability of
such organization or other person.
``(6) Erroneous designation.--
``(A) In general.--If--
``(i) the tax exemption of any organization described in
paragraph (2) is suspended under paragraph (1),
``(ii) each designation and identification described in
paragraph (2) which has been made with respect to such
organization is determined to be erroneous pursuant to the
law or Executive order under which such designation or
identification was made, and
``(iii) the erroneous designations and identifications
result in an overpayment of income tax for any taxable year
by such organization,
credit or refund (with interest) with respect to such
overpayment shall be made.
``(B) Waiver of limitations.--If the credit or refund of
any overpayment of tax described in subparagraph (A)(iii) is
prevented at any time by the operation of any law or rule of
law (including res judicata), such credit or refund may
nevertheless be allowed or made if the claim therefor is
filed before the close of the 1-year period beginning on the
date of the last determination described in subparagraph
(A)(ii).
``(7) Notice of Suspensions.--If the tax exemption of any
organization is suspended under this subsection, the Internal
Revenue Service shall update the listings of tax-exempt
organizations and shall publish appropriate notice to
taxpayers of such suspension and of the fact that
contributions to such organization are not deductible during
the period of such suspension.''.
(b) Effective Date.--The amendments made by this section
shall apply to designations made before, on, or after the
date of the enactment of this Act.
SEC. 609. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT TRAVEL
EXPENSES OF NATIONAL GUARD AND RESERVE MEMBERS.
(a) Deduction Allowed.--Section 162 (relating to certain
trade or business expenses) is amended by redesignating
subsection (p) as subsection (q) and inserting after
subsection (o) the following new subsection:
``(p) Treatment of Expenses of Members of Reserve Component
of Armed Forces of the United States.--For purposes of
subsection (a)(2), in the case of an individual who performs
services as a member of a reserve component of the Armed
Forces of the United States at any time during the taxable
year, such individual shall be deemed to be away from home in
the pursuit of a trade or
[[Page S6345]]
business for any period during which such individual is away
from home in connection with such service.''.
(b) Deduction Allowed Whether or Not Taxpayer Elects To
Itemize.--Section 62(a)(2) (relating to certain trade and
business deductions of employees) is amended by adding at the
end the following new subparagraph:
``(E) Certain expenses of members of reserve components of
the armed forces of the united states.--The deductions
allowed by section 162 which consist of expenses, determined
at a rate not in excess of the rates for travel expenses
(including per diem in lieu of subsistence) authorized for
employees of agencies under subchapter I of chapter 57 of
title 5, United States Code, paid or incurred by the taxpayer
in connection with the performance of services by such
taxpayer as a member of a reserve component of the Armed
Forces of the United States for any period during which such
individual is more than 100 miles away from home in
connection with such services.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2002.
SEC. 610. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF SPACE
SHUTTLE COLUMBIA HEROES.
(a) Income Tax Relief.--
(1) In general.--Subsection (d) of section 692 (relating to
income taxes of members of Armed Forces and victims of
certain terrorist attacks on death) is amended by adding at
the end the following new paragraph:
``(5) Relief with respect to astronauts.--The provisions of
this subsection shall apply to any astronaut whose death
occurs in the line of duty, except that paragraph (3)(B)
shall be applied by using the date of the death of the
astronaut rather than September 11, 2001.''.
(2) Conforming amendments.--
(A) Section 5(b)(1) is amended by inserting ``,
ASTRONAUTS,'' after ``FORCES''.
(B) Section 6013(f)(2)(B) is amended by inserting ``,
astronauts,'' after ``Forces''.
(3) Clerical amendments.--
(A) The heading of section 692 is amended by inserting ``,
astronauts,'' after ``forces''.
(B) The item relating to section 692 in the table of
sections for part II of subchapter J of chapter 1 is amended
by inserting ``, astronauts,'' after ``Forces''.
(4) Effective date.--The amendments made by this subsection
shall apply with respect to any astronaut whose death occurs
after December 31, 2002.
(b) Death Benefit Relief.--
(1) In general.--Subsection (i) of section 101 (relating to
certain death benefits) is amended by adding at the end the
following new paragraph:
``(4) Relief with respect to astronauts.--The provisions of
this subsection shall apply to any astronaut whose death
occurs in the line of duty.''.
(2) Clerical amendment.--The heading for subsection (i) of
section 101 is amended by inserting ``or Astronauts'' after
``Victims''.
(3) Effective date.--The amendments made by this subsection
shall apply to amounts paid after December 31, 2002, with
respect to deaths occurring after such date.
(c) Estate Tax Relief.--
(1) In general.--Section 2201(b) (defining qualified
decedent) is amended by striking ``and'' at the end of
paragraph (1)(B), by striking the period at the end of
paragraph (2) and inserting ``, and'', and by adding at the
end the following new paragraph:
``(3) any astronaut whose death occurs in the line of
duty.''.
(2) Clerical amendments.--
(A) The heading of section 2201 is amended by inserting ``,
deaths of astronauts,'' after ``forces''.
(B) The item relating to section 2201 in the table of
sections for subchapter C of chapter 11 is amended by
inserting ``, deaths of astronauts,'' after ``Forces''.
(3) Effective date.--The amendments made by this subsection
shall apply to estates of decedents dying after December 31,
2002.
SEC. 611. SLOWDOWN IN ACCELERATION OF REDUCTION IN TOP TAX
RATE TO OFFSET ANY REVENUE LOSS.
(a) In General.--The table contained in section 1(i)(2), as
amended by section 102 of this Act, is amended to read as
follows:
------------------------------------------------------------------------
The corresponding percentages shall be
substituted for the following
``In the case of taxable years percentages:
beginning during calendar year: ----------------------------------------
28% 31% 36% 39.6%
------------------------------------------------------------------------
2001........................... 27.5% 30.5% 35.5% 39.1%
2002........................... 27.0% 30.0% 35.0% 38.6%
2003, 2004, and 2005........... 25.0% 28.0% 33.0% 35.3%
2006 and thereafter............ 25.0% 28.0% 33.0% 35.0%''.
------------------------------------------------------------------------
(b) Effective Date.--The amendment made by this section
shall take effect as if included in the provisions of section
102 of this Act and section 108 of this Act shall apply to
such amendment as if so included.
______
SA 613. Mr. Santorum submitted an amendment intended to be proposed
by him to the bill S. 1054 to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. CLARIFICATION OF CONTRIBUTION IN AID OF
CONSTRUCTION FOR WATER AND SEWERAGE DISPOSAL
UTILITIES.
(a) In General.--Subparagraph (A) of section 118(c)(3)
(relating to definitions) is amended to read as follows:
``(A) Contribution in aid of construction.--The term
`contribution in aid of construction' shall be defined by
regulations prescribed by the Secretary, except that such
term--
``(i) shall include amounts paid as customer connection
fees (including amounts paid to connect the customer's water
service line or sewer lateral line to the utility's
distribution or collection system or extend a main water or
sewer line to provide service to a customer), and
``(ii) shall not include amounts paid as service charges
for starting or stopping services.''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to contributions made after the date of the
enactment of this Act.
______
SA 614. Ms. Stabenow proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the end of end of subtitle C of title V, add the
following:
SEC. ____. ENSURING ENACTMENT OF A MEDICARE PRESCRIPTION DRUG
BENEFIT.
(a) Trigger.--Notwithstanding any other provision of this
Act, the provisions as described in subsection (b) shall not
take effect except as provided in subsection (c).
(b) Provision Described.--A provision described in this
subsection is--
(1) section 102 of this Act to the extent such section
accelerates the scheduled phase down of the top tax rate of
38.6 percent to 37.6 percent in 2004 and to 35 percent in
2006; and
(2) section 116(a)(2)(B) of the Internal Revenue Code of
1986, as added by section 201 of this Act.
(c) Delay Until Enactment of a Medicare Prescription Drug
Benefit.--The provisions described in subsection (b) shall
apply to taxable years beginning in or after the calendar
year in which a prescription drug benefit under the medicare
program under title XVIII of the Social Security Act (42
U.S.C. 1395 et seq.) is enacted that is--
(1) available to all beneficiaries under such program; and
(2) actuarially equivalent to the Blue Cross and Blue
Shield benefit offered through the Federal employees health
benefits program.
______
SA 615. Mr. DAYTON submitted an amendment intended to be proposed by
him to the bill S. 1054, to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Jobs and
Growth Reconciliation Tax Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I--MODIFICATION AND ACCELERATION OF CERTAIN PREVIOUSLY ENACTED
TAX REDUCTIONS
Sec. 101. Tripling the 10-percent individual income tax rate bracket
expansion.
Sec. 102. Acceleration of increase in standard deduction for married
taxpayers filing joint returns.
Sec. 103. Acceleration of 15-percent individual income tax rate bracket
expansion for married taxpayers filing joint returns.
Sec. 104. Acceleration of increase in, and refundability of, child tax
credit.
TITLE II--APPLICATION OF SUNSET
Sec. 201. Application of EGTRRA sunset to title I.
TITLE III--REVENUE PROVISIONS
Subtitle A--Provisions Designed To Curtail Tax Shelters
Sec. 301. Clarification of economic substance doctrine.
Sec. 302. Penalty for failing to disclose reportable transaction.
Sec. 303. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 304. Penalty for understatements attributable to transactions
lacking economic substance, etc.
Sec. 305. Modifications of substantial understatement penalty for
nonreportable transactions.
[[Page S6346]]
Sec. 306. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 307. Disclosure of reportable transactions.
Sec. 308. Modifications to penalty for failure to register tax
shelters.
Sec. 309. Modification of penalty for failure to maintain lists of
investors.
Sec. 310. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 311. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 312. Penalty on failure to report interests in foreign financial
accounts.
Sec. 313. Frivolous tax submissions.
Sec. 314. Penalty on promoters of tax shelters.
Sec. 315. Statute of limitations for taxable years for which listed
transactions not reported.
Sec. 316. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Subtitle B--Enron-Related Tax Shelter Provisions
Sec. 321. Limitation on transfer or importation of built-in losses.
Sec. 322. No reduction of basis under section 734 in stock held by
partnership in corporate partner.
Sec. 323. Repeal of special rules for FASITs.
Sec. 324. Expanded disallowance of deduction for interest on
convertible debt.
Sec. 325. Expanded authority to disallow tax benefits under section
269.
Sec. 326. Modifications of certain rules relating to controlled foreign
corporations.
Sec. 327. Controlled entities ineligible for REIT status.
Subtitle C--Other Corporate Governance Provisions
Part I--General Provisions
Sec. 331. Affirmation of consolidated return regulation authority.
Sec. 332. Signing of corporate tax returns by chief executive officer.
Sec. 333. Denial of deduction for certain fines, penalties, and other
amounts.
Sec. 334. Disallowance of deduction for punitive damages.
Part II--Executive Compensation Reform
Sec. 335. Treatment of nonqualified deferred compensation funded with
assets located outside the United States.
Sec. 336. Inclusion in gross income of funded deferred compensation of
corporate insiders.
Sec. 337. Prohibition on deferral of gain from the exercise of stock
options and restricted stock gains through deferred
compensation arrangements.
Sec. 338. Increase in withholding from supplemental wage payments in
excess of $1,000,000.
Subtitle D--International Provisions
Part I--Provisions to Discourage Expatriation
Sec. 340. Revision of tax rules on expatriation.
Sec. 341. Tax treatment of inverted corporate entities.
Sec. 342. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 343. Reinsurance of United States risks in foreign jurisdictions.
Part II--Other Provisions
Sec. 344. Doubling of certain penalties, fines, and interest on
underpayments related to certain offshore financial
arrangement.
Sec. 345. Effectively connected income to include certain foreign
source income.
Sec. 346. Determination of basis of amounts paid from foreign pension
plans.
Sec. 347. Recapture of overall foreign losses on sale of controlled
foreign corporation.
Sec. 348. Prevention of mismatching of interest and original issue
discount deductions and income inclusions in transactions
with related foreign persons.
Sec. 349. Sale of gasoline and diesel fuel at duty-free sales
enterprises.
Sec. 350. Repeal of earned income exclusion of citizens or residents
living abroad.
Subtitle E--Other Revenue Provisions
Sec. 352. Addition of vaccines against hepatitis A to list of taxable
vaccines.
Sec. 353. Disallowance of certain partnership loss transfers.
Sec. 354. Treatment of stripped interests in bond and preferred stock
funds, etc.
Sec. 355. Reporting of taxable mergers and acquisitions.
Sec. 356. Minimum holding period for foreign tax credit on withholding
taxes on income other than dividends.
Sec. 357. Qualified tax collection contracts.
Sec. 358. Extension of customs user fees.
Sec. 359. Clarification of exemption from tax for small property and
casualty insurance companies.
Sec. 360. Partial payment of tax liability in installment agreements.
Sec. 361. Extension of amortization of intangibles to sports
franchises.
Sec. 362. Deposits made to suspend running of interest on potential
underpayments.
Sec. 363. Clarification of rules for payment of estimated tax for
certain deemed asset sales.
Sec. 364. Limitation on deduction for charitable contributions of
patents and similar property.
Sec. 365. Extension of provision permitting qualified transfers of
excess pension assets to retiree health accounts.
Sec. 366. Proration rules for life insurance business of property and
casualty insurance companies.
Sec. 367. Modification of treatment of transfers to creditors in
divisive reorganizations.
Subtitle F--Other Provisions
Sec. 371. Review of State agency blindness and disability
determinations.
Sec. 372. Prohibition on use of SCHIP funds to provide coverage for
childless adults.
TITLE IV--APPLICATION OF SUNSET
Sec. 401. Application of sunset to title III.
TITLE V--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
Sec. 501. Extension of the Temporary Extended Unemployment Compensation
Act of 2002.
Sec. 502. Entitlement to additional weeks of temporary extended
unemployment compensation.
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
Sec. 511. Federal-state agreements.
Sec. 512. Payments to States having agreements under this title.
Sec. 513. Financing provisions.
Sec. 514. Definitions.
Sec. 515. Applicability.
Sec. 516. Coordination with the Temporary Extended Unemployment
Compensation Act of 2002.
TITLE I--MODIFICATION AND ACCELERATION OF CERTAIN PREVIOUSLY ENACTED
TAX REDUCTIONS
SEC. 101. TRIPLING OF THE 10-PERCENT INDIVIDUAL INCOME TAX
RATE BRACKET EXPANSION.
(a) In General.--Clause (i) of section 1(i)(1)(B) (relating
to the initial bracket amount) is amended by striking
``$14,000 ($12,000 in the case of taxable years beginning
before January 1, 2008)'' and inserting ``$36,000''.
(b) Inflation Adjustment Beginning in 2004.--Subparagraph
(C) of section 1(i)(1) (relating to inflation adjustment) is
amended to read as follows:
``(C) Inflation adjustment.--In prescribing the tables
under subsection (f) which apply with respect to taxable
years beginning in calendar years after 2003--
``(i) the cost-of-living adjustment used in making
adjustments to the initial bracket amount shall be determined
under subsection (f)(3) by substituting `2002' for `1992' in
subparagraph (B) thereof, and
``(ii) such adjustment shall not apply to the amount
referred to in subparagraph (B)(iii).
If any amount after adjustment under the preceding sentence
is not a multiple of $50, such amount shall be rounded to the
next lowest multiple of $50.''.
(c) Freeze of Highest Income Tax Rate at 38.6 Percent.--The
last column in the table contained in section 1(i)(2)
(relating to reductions in rates after June 30, 2001) is
amended by striking ``37.6%'' and ``35.0%'' and inserting
``38.6%''.
(d) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2002.
(2) Subsections (b) and (c).--The amendments made by
subsections (b) and (c) shall apply to taxable years
beginning after December 31, 2003.
(3) Tables for 2003.--The Secretary of the Treasury shall
modify each table which has been prescribed for taxable years
beginning in 2003 and which relates to the amendment made by
subsection (a) to reflect each such amendment.
SEC. 102. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR
MARRIED TAXPAYERS FILING JOINT RETURNS.
(a) In General.--Paragraph (2) of section 63(c) (relating
to basic standard deduction) is amended to read as follows:
``(2) Basic standard deduction.--For purposes of paragraph
(1), the basic standard deduction is--
``(A) 200 percent of the dollar amount in effect under
subparagraph (C) for the taxable year in the case of--
``(i) a joint return, or
``(ii) a surviving spouse (as defined in section 2(a)),
``(B) $4,400 in the case of a head of household (as defined
in section 2(b)), or
``(C) $3,000 in any other case.''.
(b) Conforming Amendments.--
(1) Section 63(c)(4) is amended by striking ``(2)(D)'' each
place it occurs and inserting ``(2)(C)''.
(2) Section 63(c) is amended by striking paragraph (7).
[[Page S6347]]
(3) Section 301(d) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 103. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX
RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS
FILING JOINT RETURNS.
(a) In General.--Paragraph (8) of section 1(f ) (relating
to phaseout of marriage penalty in 15-percent bracket) is
amended to read as follows:
``(8) Elimination of marriage penalty in 15-percent
bracket.--With respect to taxable years beginning after
December 31, 2002, in prescribing the tables under paragraph
(1)--
``(A) the maximum taxable income in the 15 percent rate
bracket in the table contained in subsection (a) (and the
minimum taxable income in the next higher taxable income
bracket in such table) shall be 200 percent of the maximum
taxable income in the 15-percent rate bracket in the table
contained in subsection (c) (after any other adjustment under
this subsection), and
``(B) the comparable taxable income amounts in the table
contained in subsection (d) shall be \1/2\ of the amounts
determined under subparagraph (A).''.
(b) Conforming Amendments.--
(1) The heading for subsection (f ) of section 1 is amended
by striking ``Phaseout'' and inserting ``Elimination''.
(2) Section 302(c) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 104. ACCELERATION OF INCREASE IN, AND REFUNDABILITY OF,
CHILD TAX CREDIT.
(a) Acceleration of Increase in Credit.--Subsection (a) of
section 24 (relating to child tax credit) is amended to read
as follows:
``(a) Allowance of Credit.--There shall be allowed as a
credit against the tax imposed by this chapter for the
taxable year with respect to each qualifying child of the
taxpayer an amount equal to $1,000.''.
(b) Expansion of Credit Refundability.--Section
24(d)(1)(B)(i) (relating to portion of credit refundable) is
amended by striking ``(10 percent in the case of taxable
years beginning before January 1, 2005)''.
(c) Advance Payment of Portion of Increased Credit in
2003.--
(1) In general.--Subchapter B of chapter 65 (relating to
abatements, credits, and refunds) is amended by adding at the
end the following new section:
``SEC. 6429. ADVANCE PAYMENT OF PORTION OF INCREASED CHILD
CREDIT FOR 2003.
``(a) In General.--Each taxpayer who claimed a credit under
section 24 on the return for the taxpayer's first taxable
year beginning in 2002 shall be treated as having made a
payment against the tax imposed by chapter 1 for such taxable
year in an amount equal to the child tax credit refund amount
(if any) for such taxable year.
``(b) Child Tax Credit Refund Amount.--For purposes of this
section, the child tax credit refund amount is the amount by
which the aggregate credits allowed under part IV of
subchapter A of chapter 1 for such first taxable year would
have been increased if--
``(1) the per child amount under section 24(a)(2) for such
year were $1,000,
``(2) only qualifying children (as defined in section
24(c)) of the taxpayer for such year who had not attained age
17 as of December 31, 2003, were taken into account, and
``(3) section 24(d)(1)(B)(ii) did not apply.
``(c) Timing of Payments.--In the case of any overpayment
attributable to this section, the Secretary shall, subject to
the provisions of this title, refund or credit such
overpayment as rapidly as possible and, to the extent
practicable, before October 1, 2003. No refund or credit
shall be made or allowed under this section after December
31, 2003.
``(d) Coordination with Child Tax Credit.--
``(1) In general.--The amount of credit which would (but
for this subsection and section 26) be allowed under section
24 for the taxpayer's first taxable year beginning in 2003
shall be reduced (but not below zero) by the payments made to
the taxpayer under this section. Any failure to so reduce the
credit shall be treated as arising out of a mathematical or
clerical error and assessed according to section 6213(b)(1).
``(2) Joint returns.--In the case of a payment under this
section with respect to a joint return, half of such payment
shall be treated as having been made to each individual
filing such return.
``(e) No Interest.--No interest shall be allowed on any
overpayment attributable to this section.''.
(2) Clerical amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end
the following new item:
``Sec. 6429. Advance payment of portion of increased child credit for
2003.''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to taxable years
beginning after December 31, 2002.
(2) Subsection (c).--The amendments made by subsection (c)
shall take effect on the date of the enactment of this Act.
SEC. 105. MINIMUM TAX RELIEF TO INDIVIDUALS.
(a) In General.--So much of paragraph (1) of section 55(d)
(relating to exemption amount for taxpayers other than
corporations) as precedes subparagraph (C) thereof is amended
to read as follows:
``(1) Exemption amount for taxpayers other than
corporations.--In the case of a taxpayer other than a
corporation, the term `exemption amount' means as follows:
``(A) Joint return and surviving spouse.--In the case of a
joint return or a surviving spouse, the amount under the
following table:
``In the case of taxable years beginning: The exemption
amount is:
Before 2001..................................................$45,000
In 2001 and 2002.............................................$49,000
In 2003, 2004, and 2005......................................$57,000
After 2005..................................................$45,000.
``(B) Individual not married and not a surviving spouse.--
In the case of an individual who is not a married individual
and is not a surviving spouse, the amount under the following
table:
``In the case of taxable years beginning: The exemption
amount is:
Before 2001..................................................$33,750
In 2001 and 2002.............................................$35,750
In 2003, 2004, and 2005......................................$39,750
After 2005................................................$33,750.''.
(b) Conforming Amendments.--
(1) Section 55(d)(1)(C) is amended--
(A) by striking ``, and'' and inserting a period, and
(B) by striking ``50 percent'' and inserting ``Married
individual filing a separate return.--50 percent''.
(2) Section 55(d)(1)(D) is amended by striking ``$22,500''
and inserting ``Estate and trust.--$22,500''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
TITLE II--APPLICATION OF SUNSET
SEC. 201. APPLICATION OF EGTRRA SUNSET TO TITLE I.
Each amendment made by title I shall be subject to title IX
of the Economic Growth and Tax Relief Reconciliation Act of
2001 to the same extent and in the same manner as the
provision of such Act to which such amendment relates.
TITLE III--REVENUE PROVISIONS
Subtitle A--Provisions Designed To Curtail Tax Shelters
SEC. 301. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects) the taxpayer's economic position,
and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
In applying subclause (II), a purpose of achieving a
financial accounting benefit shall not be taken into account
in determining whether a transaction has a substantial nontax
purpose if the origin of such financial accounting benefit is
a reduction of income tax.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction
[[Page S6348]]
with a tax-indifferent party shall not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(D) Treatment of lessors.--A lessor of tangible property
subject to a lease shall be treated as satisfying the
requirements of paragraph (1)(B)(ii) with respect to the
leased property if such lease satisfies such requirements as
provided by the Secretary.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into on or after May 8,
2003.
SEC. 302. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 303. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard
[[Page S6349]]
to section 1211) be allowed for such year, shall be treated
as an increase in taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements and noneconomic substance transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 304. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant
[[Page S6350]]
facts affecting the tax treatment of the item are adequately
disclosed in the return or a statement attached to the
return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(n)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(n)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''.
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into on or after May 8,
2003.
SEC. 305. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY
FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''.
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 306. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 307. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''.
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 308. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
[[Page S6351]]
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the date the
return including the transaction is filed under section 6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 309. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 310. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority To Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct' means any action, or failure to take
action, subject to penalty under section 6700, 6701, 6707, or
6708.''.
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS.''.
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 311. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 312. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''.
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 313. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person
[[Page S6352]]
with notice that a submission is a specified frivolous
submission and such person withdraws such submission within
30 days after such notice, the penalty imposed under
paragraph (1) shall not apply with respect to such
submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''.
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''.
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''.
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-in-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, Etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''.
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 314. PENALTY ON PROMOTERS OF TAX SHELTERS.
(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''.
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 315. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(e)(1) (relating to
substantial omission of items for income taxes) is amended by
adding at the end the following new subparagraph:
``(C) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the tax for
such taxable year may be assessed, or a proceeding in court
for collection of such tax may be begun without assessment,
at any time within 6 years after the time the return is
filed. This subparagraph shall not apply to any taxable year
if the time for assessment or beginning the proceeding in
court has expired before the time a transaction is treated as
a listed transaction under section 6011.''.
(b) Effective Date.--The amendment made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 316. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable To Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
Subtitle B--Enron-Related Tax Shelter Provisions
SEC. 321. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.
(a) In General.--Section 362 (relating to basis to
corporations) is amended by adding at the end the following
new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired in
such transaction shall (notwithstanding subsections (a) and
(b)) be its fair market value immediately after such
transaction.
``(B) Property described.--For purposes of subparagraph
(A), property is described in this subparagraph if--
``(i) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(ii) gain or loss with respect to such property is
subject to such tax in the hands of the transferee
immediately after such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(C) Importation of net built-in loss.--For purposes of
subparagraph (A), there is an importation of a net built-in
loss in a transaction if the transferee's aggregate adjusted
bases of property described in subparagraph (B) which is
transferred in such transaction would (but for this
paragraph) exceed the fair market value of such property
immediately after such transaction.''.
``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred by a transferor in any
transaction which is described in subsection (a) and which is
not described in paragraph (1) of this subsection, and
``(ii) the transferee's aggregate adjusted bases of such
property so transferred would (but for this paragraph) exceed
the fair market value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred shall
not exceed the fair market value of such property immediately
after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall be
allocated among the property so transferred in proportion to
their respective built-in losses immediately before the
transaction.
``(C) Exception for transfers within affiliated group.--
Subparagraph (A) shall not apply to any transaction if the
transferor owns stock in the transferee meeting the
requirements of section 1504(a)(2). In the case of property
to which subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair market
value immediately after the transfer.''.
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) (relating to liquidation of subsidiary) is
amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
[[Page S6353]]
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(1)(B)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions after February 13, 2003.
SEC. 322. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK
HELD BY PARTNERSHIP IN CORPORATE PARTNER.
(a) In General.--Section 755 is amended by adding at the
end the following new subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any
decrease in the adjusted basis of partnership property under
section 734(b)--
``(1) no allocation may be made to stock in a corporation
(or any person which is related (within the meaning of
section 267(b) or 707(b)(1)) to such corporation) which is a
partner in the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to
other partnership property.
Gain shall be recognized to the partnership to the extent
that the amount required to be allocated under paragraph (2)
to other partnership property exceeds the aggregate adjusted
basis of such other property immediately before the
allocation required by paragraph (2).''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions after February 13, 2003.
SEC. 323. REPEAL OF SPECIAL RULES FOR FASITS.
(a) In General.--Part V of subchapter M of chapter 1
(relating to financial asset securitization investment
trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) is amended by striking
``REMIC, or FASIT'' and inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) is amended by
striking ``a REMIC to which part IV of subchapter M applies,
or a FASIT to which part V of subchapter M applies,'' and
inserting ``or a REMIC to which part IV of subchapter M
applies,''.
(3) Paragraph (1) of section 582(c) is amended by striking
``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) is amended by
striking the last sentence.
(5) Paragraph (5) of section 860G(a) is amended by adding
``and'' at the end of subparagraph (B), by striking ``, and''
at the end of subparagraph (C) and inserting a period, and by
striking subparagraph (D).
(6) Subparagraph (C) of section 1202(e)(4) is amended by
striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
(7) Subparagraph (C) of section 7701(a)(19) is amended by
adding ``and'' at the end of clause (ix), by striking ``,
and'' at the end of clause (x) and inserting a period, and by
striking clause (xi).
(8) The table of parts for subchapter M of chapter 1 is
amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on February
14, 2003.
(2) Exception for existing fasits.--
(A) In general.--Paragraph (1) shall not apply to any FASIT
in existence on the date of the enactment of this Act to the
extent that regular interests issued by the FASIT before such
date continue to remain outstanding in accordance with the
original terms of issuance.
(B) Transfer of additional assets not permitted.--Except as
provided in regulations prescribed by the Secretary of the
Treasury or the Secretary's delegate, subparagraph (A) shall
cease to apply as of the earliest date after the date of the
enactment of this Act that any property is transferred to the
FASIT.
SEC. 324. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.
(a) In General.--Paragraph (2) of section 163(l) is amended
by striking ``or a related party'' and inserting ``or equity
held by the issuer (or any related party) in any other
person''.
(b) Exception for Certain Instruments Issued By Dealers In
Securities.--Section 163(l) is amended by redesignating
paragraphs (4) and (5) as paragraphs (5) and (6) and by
inserting after paragraph (3) the following new paragraph:
``(4) Exception for certain instruments issued by dealers
in securities.--For purposes of this subsection, the term
`disqualified debt instrument' does not include indebtedness
issued by a dealer in securities (or a related party) which
is payable in, or by reference to, equity (other than equity
of the issuer or a related party) held by such dealer in its
capacity as a dealer in securities. For purposes of this
paragraph, the term `dealer in securities' has the meaning
given such term by section 475.''.
(c) Conforming Amendment.--Paragraph (3) of section 163(l)
is amended by striking ``or a related party'' in the material
preceding subparagraph (A) and inserting ``or any other
person''.
(d) Effective Date.--The amendments made by this section
shall apply to debt instruments issued after February 13,
2003.
SEC. 325. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER
SECTION 269.
(a) In General.--Subsection (a) of section 269 (relating to
acquisitions made to evade or avoid income tax) is amended to
read as follows:
``(a) In General.--If--
``(1)(A) any person acquires stock in a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such
property, in the hands of the acquiring corporation, is
determined by reference to the basis in the hands of the
transferor corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax by
securing the benefit of a deduction, credit, or other
allowance,
then the Secretary may disallow such deduction, credit, or
other allowance.''.
(b) Effective Date.--The amendment made by this section
shall apply to stock and property acquired after February 13,
2003.
SEC. 326. MODIFICATIONS OF CERTAIN RULES RELATING TO
CONTROLLED FOREIGN CORPORATIONS.
(a) Limitation on Exception From PFIC Rules for United
States Shareholders of Controlled Foreign Corporations.--
Paragraph (2) of section 1297(e) (relating to passive
investment company) is amended by adding at the end the
following flush sentence:
``Such term shall not include any period if there is only a
remote likelihood of an inclusion in gross income under
section 951(a)(1)(A)(i) of subpart F income of such
corporation for such period.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years on controlled foreign
corporation beginning after February 13, 2003, and to taxable
years of United States shareholder in which or with which
such taxable years of controlled foreign corporations end.
SEC. 327. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.
(a) In General.--Subsection (a) of section 856 (relating to
definition of real estate investment trust) is amended by
striking ``and'' at the end of paragraph (6), by
redesignating paragraph (7) as paragraph (8), and by
inserting after paragraph (6) the following new paragraph:
``(7) which is not a controlled entity (as defined in
subsection (l)); and''.
(b) Controlled Entity.--Section 856 is amended by adding at
the end the following new subsection:
``(l) Controlled Entity.--
``(1) In general.--For purposes of subsection (a)(7), an
entity is a controlled entity if, at any time during the
taxable year, one person (other than a qualified entity)--
``(A) in the case of a corporation, owns stock--
``(i) possessing at least 50 percent of the total voting
power of the stock of such corporation, or
``(ii) having a value equal to at least 50 percent of the
total value of the stock of such corporation, or
``(B) in the case of a trust, owns beneficial interests in
the trust which would meet the requirements of subparagraph
(A) if such interests were stock.
``(2) Qualified entity.--For purposes of paragraph (1), the
term `qualified entity' means--
``(A) any real estate investment trust, and
``(B) any partnership in which one real estate investment
trust owns at least 50 percent of the capital and profits
interests in the partnership.
``(3) Attribution rules.--For purposes of this paragraphs
(1) and (2)--
``(A) In general.--Rules similar to the rules of
subsections (d)(5) and (h)(3) shall apply; except that
section 318(a)(3)(C) shall not be applied under such rules to
treat stock owned by a qualified entity as being owned by a
person which is not a qualified entity.
``(B) Stapled entities.--A group of entities which are
stapled entities (as defined in section 269B(c)(2)) shall be
treated as one person.
``(4) Exception for certain new reits.--
``(A) In general.--The term `controlled entity' shall not
include an incubator REIT.
``(B) Incubator reit.--A corporation shall be treated as an
incubator REIT for any taxable year during the eligibility
period if it meets all the following requirements for such
year:
``(i) The corporation elects to be treated as an incubator
REIT.
``(ii) The corporation has only voting common stock
outstanding.
``(iii) Not more than 50 percent of the corporation's real
estate assets consist of mortgages.
``(iv) From not later than the beginning of the last half
of the second taxable year, at least 10 percent of the
corporation's capital is provided by lenders or equity
investors who are unrelated to the corporation's largest
shareholder.
``(v) The corporation annually increases the value of its
real estate assets by at least 10 percent.
``(vi) The directors of the corporation adopt a resolution
setting forth an intent to engage in a going public
transaction.
No election may be made with respect to any REIT if an
election under this subsection was in effect for any
predecessor of such REIT.
[[Page S6354]]
``(C) Eligibility period.--
``(i) In general.--The eligibility period (for which an
incubator REIT election can be made) begins with the REIT's
second taxable year and ends at the close of the REIT's third
taxable year, except that the REIT may, subject to clauses
(ii), (iii), and (iv), elect to extend such period for an
additional 2 taxable years.
``(ii) Going public transaction.--A REIT may not elect to
extend the eligibility period under clause (i) unless it
enters into an agreement with the Secretary that if it does
not engage in a going public transaction by the end of the
extended eligibility period, it shall pay Federal income
taxes for the 2 years of the extended eligibility period as
if it had not made an incubator REIT election and had ceased
to qualify as a REIT for those 2 taxable years.
``(iii) Returns, interest, and notice.--
``(I) Returns.--In the event the corporation ceases to be
treated as a REIT by operation of clause (ii), the
corporation shall file any appropriate amended returns
reflecting the change in status within 3 months of the close
of the extended eligibility period.
``(II) Interest.--Interest shall be payable on any tax
imposed by reason of clause (ii) for any taxable year but,
unless there was a finding under subparagraph (D), no
substantial underpayment penalties shall be imposed.
``(III) Notice.--The corporation shall, at the same time it
files its returns under subclause (I), notify its
shareholders and any other persons whose tax position is, or
may reasonably be expected to be, affected by the change in
status so they also may file any appropriate amended returns
to conform their tax treatment consistent with the
corporation's loss of REIT status.
``(IV) Regulations.--The Secretary shall provide
appropriate regulations setting forth transferee liability
and other provisions to ensure collection of tax and the
proper administration of this provision.
``(iv) Clauses (ii) and (iii) shall not apply if the
corporation allows its incubator REIT status to lapse at the
end of the initial 2-year eligibility period without engaging
in a going public transaction if the corporation is not a
controlled entity as of the beginning of its fourth taxable
year. In such a case, the corporation's directors may still
be liable for the penalties described in subparagraph (D)
during the eligibility period.
``(D) Special penalties.--If the Secretary determines that
an incubator REIT election was filed for a principal purpose
other than as part of a reasonable plan to undertake a going
public transaction, an excise tax of $20,000 shall be imposed
on each of the corporation's directors for each taxable year
for which an election was in effect.
``(E) Going public transaction.--For purposes of this
paragraph, a going public transaction means--
``(i) a public offering of shares of the stock of the
incubator REIT;
``(ii) a transaction, or series of transactions, that
results in the stock of the incubator REIT being regularly
traded on an established securities market and that results
in at least 50 percent of such stock being held by
shareholders who are unrelated to persons who held such stock
before it began to be so regularly traded; or
``(iii) any transaction resulting in ownership of the REIT
by 200 or more persons (excluding the largest single
shareholder) who in the aggregate own at least 50 percent of
the stock of the REIT.
For the purposes of this subparagraph, the rules of paragraph
(3) shall apply in determining the ownership of stock.
``(F) Definitions.--The term `established securities
market' shall have the meaning set forth in the regulations
under section 897.''.
(c) Conforming Amendment.--Paragraph (2) of section 856(h)
is amended by striking ``and (6)'' each place it appears and
inserting ``, (6), and (7)''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after May 8, 2003.
(2) Exception for existing controlled entities.--The
amendments made by this section shall not apply to any entity
which is a controlled entity (as defined in section 856(l) of
the Internal Revenue Code of 1986, as added by this section)
as of May 8, 2003, which is a real estate investment trust
for the taxable year which includes such date, and which has
significant business assets or activities as of such date.
For purposes of the preceding sentence, an entity shall be
treated as such a controlled entity on May 8, 2003, if it
becomes such an entity after such date in a transaction--
(A) made pursuant to a written agreement which was binding
on such date and at all times thereafter, or
(B) described on or before such date in a filing with the
Securities and Exchange Commission required solely by reason
of the transaction.
Subtitle C--Other Corporate Governance Provisions
PART I--GENERAL PROVISIONS
SEC. 331. AFFIRMATION OF CONSOLIDATED RETURN REGULATION
AUTHORITY.
(a) In General.--Section 1502 (relating to consolidated
return regulations) is amended by adding at the end the
following new sentence: ``In prescribing such regulations,
the Secretary may prescribe rules applicable to corporations
filing consolidated returns under section 1501 that are
different from other provisions of this title that would
apply if such corporations filed separate returns.''.
(b) Result Not Overturned.--Notwithstanding subsection (a),
the Internal Revenue Code of 1986 shall be construed by
treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as in
effect on January 1, 2001) as being inapplicable to the type
of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
(c) Effective Date.--The provisions of this section shall
apply to taxable years beginning before, on, or after the
date of the enactment of this Act.
SEC. 332. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE
OFFICER.
(a) In General.--Section 6062 (relating to signing of
corporation returns) is amended by striking the first
sentence and inserting the following new sentence: ``The
return of a corporation with respect to income shall be
signed by the chief executive officer of such corporation (or
other such officer of the corporation as the Secretary may
designate if the corporation does not have a chief executive
officer). The preceding sentence shall not apply to any
return of a regulated investment company (within the meaning
of section 851).''.
(b) Effective Date.--The amendment made by this section
shall apply to returns filed after the date of the enactment
of this Act.
SEC. 333. DENIAL OF DEDUCTION FOR CERTAIN FINES, PENALTIES,
AND OTHER AMOUNTS.
(a) In General.--Subsection (f) of section 162 (relating to
trade or business expenses) is amended to read as follows:
``(f) Fines, Penalties, and Other Amounts.--
``(1) In general.--Except as provided in paragraph (2), no
deduction otherwise allowable shall be allowed under this
chapter for any amount paid or incurred (whether by suit,
agreement, or otherwise) to, or at the direction of, a
government or entity described in paragraph (3) in relation
to the violation of any law or the investigation or inquiry
into the potential violation of any law.
``(2) Exception for amounts constituting restitution.--
Paragraph (1) shall not apply to any amount which the
taxpayer establishes constitutes restitution for damage or
harm caused by the violation of any law or the potential
violation of any law. This paragraph shall not apply to any
amount paid or incurred as reimbursement to the government or
entity for the costs of any investigation or litigation.
``(3) Certain nongovernmental regulatory entities.--An
entity is described in this paragraph if it is--
``(A) a nongovernmental entity which exercises self-
regulatory powers (including imposing sanctions) in
connection with a qualified board or exchange (as defined in
section 1256(g)(7)), or
``(B) to the extent provided in regulations, a
nongovernmental entity which exercises self-regulatory powers
(including imposing sanctions) as part of performing an
essential governmental function.''.
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid or incurred after April 27, 2003,
except that such amendment shall not apply to amounts paid or
incurred under any binding order or agreement entered into on
or before April 27, 2003. Such exception shall not apply to
an order or agreement requiring court approval unless the
approval was obtained on or before April 27, 2003.
SEC. 334. DISALLOWANCE OF DEDUCTION FOR PUNITIVE DAMAGES.
(a) Disallowance of Deduction.--
(1) In general.--Section 162(g) (relating to treble damage
payments under the antitrust laws) is amended by adding at
the end the following new paragraph:
``(2) Punitive damages.--No deduction shall be allowed
under this chapter for any amount paid or incurred for
punitive damages in connection with any judgment in, or
settlement of, any action. This paragraph shall not apply to
punitive damages described in section 104(c).''.
(2) Conforming amendments.--
(A) Section 162(g) is amended--
(i) by striking ``If'' and inserting:
``(1) Treble damages.--If'', and
(ii) by redesignating paragraphs (1) and (2) as
subparagraphs (A) and (B), respectively.
(B) The heading for section 162(g) is amended by inserting
``or Punitive Damages'' after ``Laws''.
(b) Inclusion in Income of Punitive Damages Paid by Insurer
or Otherwise.--
(1) In general.--Part II of subchapter B of chapter 1
(relating to items specifically included in gross income) is
amended by adding at the end the following new section:
``SEC. 91. PUNITIVE DAMAGES COMPENSATED BY INSURANCE OR
OTHERWISE.
``Gross income shall include any amount paid to or on
behalf of a taxpayer as insurance or otherwise by reason of
the taxpayer's liability (or agreement) to pay punitive
damages.''.
(2) Reporting requirements.--Section 6041 (relating to
information at source) is amended by adding at the end the
following new subsection:
``(f) Section To Apply to Punitive Damages Compensation.--
This section shall apply to payments by a person to or on
behalf of another person as insurance or otherwise by reason
of the other person's liability (or agreement) to pay
punitive damages.''.
[[Page S6355]]
(3) Conforming amendment.--The table of sections for part
II of subchapter B of chapter 1 is amended by adding at the
end the following new item:
``Sec. 91. Punitive damages compensated by insurance or otherwise.''.
(c) Effective Date.--The amendments made by this section
shall apply to damages paid or incurred on or after the date
of the enactment of this Act.
PART II--EXECUTIVE COMPENSATION REFORM
SEC. 335. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION
FUNDED WITH ASSETS LOCATED OUTSIDE THE UNITED
STATES.
(a) In General.--Section 83(c) (relating to special rules
for property transferred in connection with performance of
services) is amended by adding at the end the following new
paragraph:
``(4) Foreign assets funding nonqualified deferred
compensation arrangements.--
``(A) In general.--In determining whether there is a
transfer of property for purposes of subsection (a), if
assets are--
``(i) designated or otherwise available for the payment of
nonqualified deferred compensation, and
``(ii) located outside the United States,
such assets shall not be treated as subject to the claims of
creditors.
``(B) Compensation for services performed in foreign
jurisdiction.--Subparagraph (A) shall not apply to assets
located in a foreign jurisdiction if substantially all of the
services to which the nonqualified deferred compensation
relates are performed in such jurisdiction.
``(C) Regulations.--The Secretary shall prescribe such
regulations as are necessary to carry out the provisions of
this paragraph, including regulations to exempt arrangements
from the application of this paragraph if--
``(i) the arrangement will not result in an improper
deferral of United States tax, and
``(ii) the assets involved in the arrangement will be
readily accessible in any insolvency or bankruptcy
proceeding.''.
(b) Effective Date.--The amendments made by this section
shall apply to amounts deferred in taxable years beginning
after December 31, 2003.
SEC. 336. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED
COMPENSATION OF CORPORATE INSIDERS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 409A. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED
COMPENSATION OF CORPORATE INSIDERS.
``(a) In General.--If an employer maintains a funded
deferred compensation plan--
``(1) compensation of any disqualified individual which is
deferred under such funded deferred compensation plan shall
be included in the gross income of the disqualified
individual or beneficiary for the 1st taxable year in which
there is no substantial risk of forfeiture of the rights to
such compensation, and
``(2) the tax treatment of any amount made available under
the plan to a disqualified individual or beneficiary shall be
determined under section 72 (relating to annuities, etc.).
``(b) Funded Deferred Compensation Plan.--For purposes of
this section--
``(1) In general.--The term `funded deferred compensation
plan' means any plan providing for the deferral of
compensation unless--
``(A) the employee's rights to the compensation deferred
under the plan are no greater than the rights of a general
creditor of the employer, and
``(B) all amounts set aside (directly or indirectly) for
purposes of paying the deferred compensation, and all income
attributable to such amounts, remain (until made available to
the participant or other beneficiary) solely the property of
the employer (without being restricted to the provision of
benefits under the plan),
``(C) the amounts referred to in subparagraph (B) are
available to satisfy the claims of the employer's general
creditors at all times (not merely after bankruptcy or
insolvency), and
``(D) the investment options which a participant may elect
under the plan are the same as the investment options which a
participant may elect under the qualified employer plan of
the employer which has the fewest investment options.
Such term shall not include a qualified employer plan.
``(2) Special rules.--
``(A) Employee's rights.--A plan shall be treated as
failing to meet the requirements of paragraph (1)(A) unless--
``(i) the compensation deferred under the plan is payable
only upon separation from service, death, disability (within
the meaning of section 1614(a)(3) of the Social Security Act
(42 U.S.C. 1382c(a)(3))), or at a specified time (or pursuant
to a fixed schedule), and
``(ii) the plan does not permit the acceleration of the
time such deferred compensation is payable by reason of any
event.
If the employer and employee agree to a modification of the
plan that accelerates the time for payment of any deferred
compensation, then all compensation previously deferred under
the plan shall be includible in gross income for the taxable
year during which such modification takes effect and the
taxpayer shall pay interest at the underpayment rate on the
underpayments that would have occurred had the deferred
compensation been includible in gross income on the earliest
date that there is no substantial risk of forfeiture of the
rights to such compensation.
``(B) Creditor's rights.--A plan shall be treated as
failing to meet the requirements of paragraph (1)(B) with
respect to amounts set aside in a trust unless--
``(i) the employee has no beneficial interest in the trust,
``(ii) assets in the trust are available to satisfy claims
of general creditors at all times (not merely after
bankruptcy or insolvency), and
``(iii) there is no factor that would make it more
difficult for general creditors to reach the assets in the
trust than it would be if the trust assets were held directly
by the employer in the United States.
Except as provided in regulations prescribed by the
Secretary, such a factor shall include the location of the
trust outside the United States unless substantially all of
the services to which the nonqualified deferred compensation
relates are performed outside the United States. Such
regulations may exempt any such trust if the trust will not
result in an improper deferral of United States tax, and the
assets involved in the trust will be readily accessible in
any insolvency or bankruptcy proceeding.
``(c) Disqualified Individual.--For purposes of this
section, the term `disqualified individual' means, with
respect to a corporation, any individual--
``(1) who is subject to the requirements of section 16(a)
of the Securities Exchange Act of 1934 with respect to such
corporation, or
``(2) who would be subject to such requirements if such
corporation were an issuer of equity securities referred to
in such section.
``(d) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Qualified employer plan.--The term `qualified
employer plan' means--
``(A) any plan, contract, pension, account, or trust
described in subparagraph (A) or (B) of section 219(g)(5),
and
``(B) any other plan of an organization exempt from tax
under subtitle A.
``(2) Plan includes arrangements, etc.--The term `plan'
includes any agreement or arrangement.
``(3) Substantial risk of forfeiture.--The rights of a
person to compensation are subject to a substantial risk of
forfeiture if such person's rights to such compensation are
conditioned upon the future performance of substantial
services by any individual.
``(4) Treatment of earnings.--References to deferred
compensation shall be treated as including references to
income attributable to such compensation or such income.''.
(b) Clerical Amendment.--The table of sections for such
subpart A is amended by adding at the end the following new
item:
``Sec. 409A. Inclusion in gross income of funded deferred compensation
of corporate insiders.''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts deferred in taxable years beginning
after December 31, 2003.
SEC. 337. PROHIBITION ON DEFERRAL OF GAIN FROM THE EXERCISE
OF STOCK OPTIONS AND RESTRICTED STOCK GAINS
THROUGH DEFERRED COMPENSATION ARRANGEMENTS.
(a) In General.--Section 83 (relating to property
transferred in connection with performance of services) is
amending by adding at the end the following new subsection:
``(i) Prohibition on Additional Deferral Through Deferred
Compensation Arrangements.--If a taxpayer elects to exchange
an option to purchase employer securities--
``(1) to which subsection (a) applies, or
``(2) which is described in subsection (e)(3),
or any other compensation based on employer securities, for a
right to receive future payments, then, notwithstanding any
other provision of this title, there shall be included in
gross income for the taxable year of the exchange an amount
equal to the present value of such right (or such other
amount as the Secretary may by regulations specify). For
purposes of this subsection, the term `employer securities'
has the meaning given such term by section 409(l).''.
(b) Effective Date.--The amendment made by this section
shall apply to any exchange after December 31, 2003.
SEC. 338. INCREASE IN WITHHOLDING FROM SUPPLEMENTAL WAGE
PAYMENTS IN EXCESS OF $1,000,000.
(a) In General.--If an employer elects under Treasury
Regulation 31.3402(g)-1 to determine the amount to be
deducted and withheld from any supplemental wage payment by
using a flat percentage rate, the rate to be used in
determining the amount to be so deducted and withheld shall
not be less than 28 percent (or the corresponding rate in
effect under section 1(i)(2) of the Internal Revenue Code of
1986 for taxable years beginning in the calendar year in
which the payment is made).
(b) Special Rule for Large Payments.--
(1) In general.--Notwithstanding subsection (a), if the
supplemental wage payment, when added to all such payments
previously made by the employer to the employee during the
calendar year, exceeds $1,000,000, the rate used with respect
to such excess shall be equal to the maximum rate of tax in
effect under section 1 of such Code for taxable years
beginning in such calendar year.
[[Page S6356]]
(2) Aggregation.--All persons treated as a single employer
under subsection (a) or (b) of section 52 of the Internal
Revenue Code of 1986 shall be treated as a single employer
for purposes of this subsection.
(c) Conforming Amendment.--Section 13273 of the Revenue
Reconciliation Act of 1993 (Public Law 103-66) is repealed.
(d) Effective Date.--The provisions of, and the amendment
made by, this section shall apply to payments made after
December 31, 2003.
Subtitle D--International Provisions
PART I--PROVISIONS TO DISCOURAGE EXPATRIATION
SEC. 340. REVISION OF TAX RULES ON EXPATRIATION.
(a) In General.--Subpart A of part II of subchapter N of
chapter 1 is amended by inserting after section 877 the
following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--Except as provided in subsections
(d) and (f), all property of a covered expatriate to whom
this section applies shall be treated as sold on the day
before the expatriation date for its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this title,
any gain arising from such sale shall be taken into account
for the taxable year of the sale, and
``(B) any loss arising from such sale shall be taken into
account for the taxable year of the sale to the extent
otherwise provided by this title, except that section 1091
shall not apply to any such loss.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under the preceding sentence.
``(3) Exclusion for certain gain.--
``(A) In general.--The amount which, but for this
paragraph, would be includible in the gross income of any
individual by reason of this section shall be reduced (but
not below zero) by $600,000. For purposes of this paragraph,
allocable expatriation gain taken into account under
subsection (f)(2) shall be treated in the same manner as an
amount required to be includible in gross income.
``(B) Cost-of-living adjustment.--
``(i) In general.--In the case of an expatriation date
occurring in any calendar year after 2003, the $600,000
amount under subparagraph (A) shall be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2002' for `calendar year 1992' in
subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount after adjustment
under clause (i) is not a multiple of $1,000, such amount
shall be rounded to the next lower multiple of $1,000.
``(4) Election to continue to be taxed as united states
citizen.--
``(A) In general.--If a covered expatriate elects the
application of this paragraph--
``(i) this section (other than this paragraph and
subsection (i)) shall not apply to the expatriate, but
``(ii) in the case of property to which this section would
apply but for such election, the expatriate shall be subject
to tax under this title in the same manner as if the
individual were a United States citizen.
``(B) Requirements.--Subparagraph (A) shall not apply to an
individual unless the individual--
``(i) provides security for payment of tax in such form and
manner, and in such amount, as the Secretary may require,
``(ii) consents to the waiver of any right of the
individual under any treaty of the United States which would
preclude assessment or collection of any tax which may be
imposed by reason of this paragraph, and
``(iii) complies with such other requirements as the
Secretary may prescribe.
``(C) Election.--An election under subparagraph (A) shall
apply to all property to which this section would apply but
for the election and, once made, shall be irrevocable. Such
election shall also apply to property the basis of which is
determined in whole or in part by reference to the property
with respect to which the election was made.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property treated as
sold by reason of subsection (a), the payment of the
additional tax attributable to such property shall be
postponed until the due date of the return for the taxable
year in which such property is disposed of (or, in the case
of property disposed of in a transaction in which gain is not
recognized in whole or in part, until such other date as the
Secretary may prescribe).
``(2) Determination of tax with respect to property.--For
purposes of paragraph (1), the additional tax attributable to
any property is an amount which bears the same ratio to the
additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into
account under subsection (a) with respect to such property
bears to the total gain taken into account under subsection
(a) with respect to all property to which subsection (a)
applies.
``(3) Termination of postponement.--No tax may be postponed
under this subsection later than the due date for the return
of tax imposed by this chapter for the taxable year which
includes the date of death of the expatriate (or, if earlier,
the time that the security provided with respect to the
property fails to meet the requirements of paragraph (4),
unless the taxpayer corrects such failure within the time
specified by the Secretary).
``(4) Security.--
``(A) In general.--No election may be made under paragraph
(1) with respect to any property unless adequate security is
provided to the Secretary with respect to such property.
``(B) Adequate security.--For purposes of subparagraph (A),
security with respect to any property shall be treated as
adequate security if--
``(i) it is a bond in an amount equal to the deferred tax
amount under paragraph (2) for the property, or
``(ii) the taxpayer otherwise establishes to the
satisfaction of the Secretary that the security is adequate.
``(5) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer consents to the
waiver of any right under any treaty of the United States
which would preclude assessment or collection of any tax
imposed by reason of this section.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable. An election may be made under paragraph
(1) with respect to an interest in a trust with respect to
which gain is required to be recognized under subsection
(f)(1).
``(7) Interest.--For purposes of section 6601--
``(A) the last date for the payment of tax shall be
determined without regard to the election under this
subsection, and
``(B) section 6621(a)(2) shall be applied by substituting
`5 percentage points' for `3 percentage points' in
subparagraph (B) thereof.
``(c) Covered Expatriate.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (2), the
term `covered expatriate' means an expatriate.
``(2) Exceptions.--An individual shall not be treated as a
covered expatriate if--
``(A) the individual--
``(i) became at birth a citizen of the United States and a
citizen of another country and, as of the expatriation date,
continues to be a citizen of, and is taxed as a resident of,
such other country, and
``(ii) has not been a resident of the United States (as
defined in section 7701(b)(1)(A)(ii)) during the 5 taxable
years ending with the taxable year during which the
expatriation date occurs, or
``(B)(i) the individual's relinquishment of United States
citizenship occurs before such individual attains age 18\1/
2\, and
``(ii) the individual has been a resident of the United
States (as so defined) for not more than 5 taxable years
before the date of relinquishment.
``(d) Exempt Property; Special Rules for Pension Plans.--
``(1) Exempt property.--This section shall not apply to the
following:
``(A) United states real property interests.--Any United
States real property interest (as defined in section
897(c)(1)), other than stock of a United States real property
holding corporation which does not, on the day before the
expatriation date, meet the requirements of section
897(c)(2).
``(B) Specified property.--Any property or interest in
property not described in subparagraph (A) which the
Secretary specifies in regulations.
``(2) Special rules for certain retirement plans.--
``(A) In general.--If a covered expatriate holds on the day
before the expatriation date any interest in a retirement
plan to which this paragraph applies--
``(i) such interest shall not be treated as sold for
purposes of subsection (a)(1), but
``(ii) an amount equal to the present value of the
expatriate's nonforfeitable accrued benefit shall be treated
as having been received by such individual on such date as a
distribution under the plan.
``(B) Treatment of subsequent distributions.--In the case
of any distribution on or after the expatriation date to or
on behalf of the covered expatriate from a plan from which
the expatriate was treated as receiving a distribution under
subparagraph (A), the amount otherwise includible in gross
income by reason of the subsequent distribution shall be
reduced by the excess of the amount includible in gross
income under subparagraph (A) over any portion of such amount
to which this subparagraph previously applied.
``(C) Treatment of subsequent distributions by plan.--For
purposes of this title, a retirement plan to which this
paragraph applies, and any person acting on the plan's
behalf, shall treat any subsequent distribution described in
subparagraph (B) in the same manner as such distribution
would be treated without regard to this paragraph.
``(D) Applicable plans.--This paragraph shall apply to--
``(i) any qualified retirement plan (as defined in section
4974(c)),
``(ii) an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in
section 457(e)(1)(A), and
``(iii) to the extent provided in regulations, any foreign
pension plan or similar retirement arrangements or programs.
[[Page S6357]]
``(e) Definitions.--For purposes of this section--
``(1) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes
citizenship, and
``(B) any long-term resident of the United States who--
``(i) ceases to be a lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)), or
``(ii) commences to be treated as a resident of a foreign
country under the provisions of a tax treaty between the
United States and the foreign country and who does not waive
the benefits of such treaty applicable to residents of the
foreign country.
``(2) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United States
citizenship, or
``(B) in the case of a long-term resident of the United
States, the date of the event described in clause (i) or (ii)
of paragraph (1)(B).
``(3) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing United States citizenship on the
earliest of--
``(A) the date the individual renounces such individual's
United States nationality before a diplomatic or consular
officer of the United States pursuant to paragraph (5) of
section 349(a) of the Immigration and Nationality Act (8
U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the United
States Department of State a signed statement of voluntary
relinquishment of United States nationality confirming the
performance of an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Immigration
and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
``(C) the date the United States Department of State issues
to the individual a certificate of loss of nationality, or
``(D) the date a court of the United States cancels a
naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(4) Long-term resident.--The term `long-term resident'
has the meaning given to such term by section 877(e)(2).
``(f) Special Rules Applicable to Beneficiaries' Interests
in Trust.--
``(1) In general.--Except as provided in paragraph (2), if
an individual is determined under paragraph (3) to hold an
interest in a trust on the day before the expatriation date--
``(A) the individual shall not be treated as having sold
such interest,
``(B) such interest shall be treated as a separate share in
the trust, and
``(C)(i) such separate share shall be treated as a separate
trust consisting of the assets allocable to such share,
``(ii) the separate trust shall be treated as having sold
its assets on the day before the expatriation date for their
fair market value and as having distributed all of its assets
to the individual as of such time, and
``(iii) the individual shall be treated as having
recontributed the assets to the separate trust.
Subsection (a)(2) shall apply to any income, gain, or loss of
the individual arising from a distribution described in
subparagraph (C)(ii). In determining the amount of such
distribution, proper adjustments shall be made for
liabilities of the trust allocable to an individual's share
in the trust.
``(2) Special rules for interests in qualified trusts.--
``(A) In general.--If the trust interest described in
paragraph (1) is an interest in a qualified trust--
``(i) paragraph (1) and subsection (a) shall not apply, and
``(ii) in addition to any other tax imposed by this title,
there is hereby imposed on each distribution with respect to
such interest a tax in the amount determined under
subparagraph (B).
``(B) Amount of tax.--The amount of tax under subparagraph
(A)(ii) shall be equal to the lesser of--
``(i) the highest rate of tax imposed by section 1(e) for
the taxable year which includes the day before the
expatriation date, multiplied by the amount of the
distribution, or
``(ii) the balance in the deferred tax account immediately
before the distribution determined without regard to any
increases under subparagraph (C)(ii) after the 30th day
preceding the distribution.
``(C) Deferred tax account.--For purposes of subparagraph
(B)(ii)--
``(i) Opening balance.--The opening balance in a deferred
tax account with respect to any trust interest is an amount
equal to the tax which would have been imposed on the
allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under
subsection (a).
``(ii) Increase for interest.--The balance in the deferred
tax account shall be increased by the amount of interest
determined (on the balance in the account at the time the
interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable
under section 6621 for underpayments of tax for such periods,
except that section 6621(a)(2) shall be applied by
substituting `5 percentage points' for `3 percentage points'
in subparagraph (B) thereof.
``(iii) Decrease for taxes previously paid.--The balance in
the tax deferred account shall be reduced--
``(I) by the amount of taxes imposed by subparagraph (A) on
any distribution to the person holding the trust interest,
and
``(II) in the case of a person holding a nonvested
interest, to the extent provided in regulations, by the
amount of taxes imposed by subparagraph (A) on distributions
from the trust with respect to nonvested interests not held
by such person.
``(D) Allocable expatriation gain.--For purposes of this
paragraph, the allocable expatriation gain with respect to
any beneficiary's interest in a trust is the amount of gain
which would be allocable to such beneficiary's vested and
nonvested interests in the trust if the beneficiary held
directly all assets allocable to such interests.
``(E) Tax deducted and withheld.--
``(i) In general.--The tax imposed by subparagraph (A)(ii)
shall be deducted and withheld by the trustees from the
distribution to which it relates.
``(ii) Exception where failure to waive treaty rights.--If
an amount may not be deducted and withheld under clause (i)
by reason of the distributee failing to waive any treaty
right with respect to such distribution--
``(I) the tax imposed by subparagraph (A)(ii) shall be
imposed on the trust and each trustee shall be personally
liable for the amount of such tax, and
``(II) any other beneficiary of the trust shall be entitled
to recover from the distributee the amount of such tax
imposed on the other beneficiary.
``(F) Disposition.--If a trust ceases to be a qualified
trust at any time, a covered expatriate disposes of an
interest in a qualified trust, or a covered expatriate
holding an interest in a qualified trust dies, then, in lieu
of the tax imposed by subparagraph (A)(ii), there is hereby
imposed a tax equal to the lesser of--
``(i) the tax determined under paragraph (1) as if the day
before the expatriation date were the date of such cessation,
disposition, or death, whichever is applicable, or
``(ii) the balance in the tax deferred account immediately
before such date.
Such tax shall be imposed on the trust and each trustee shall
be personally liable for the amount of such tax and any other
beneficiary of the trust shall be entitled to recover from
the covered expatriate or the estate the amount of such tax
imposed on the other beneficiary.
``(G) Definitions and special rules.--For purposes of this
paragraph--
``(i) Qualified trust.--The term `qualified trust' means a
trust which is described in section 7701(a)(30)(E).
``(ii) Vested interest.--The term `vested interest' means
any interest which, as of the day before the expatriation
date, is vested in the beneficiary.
``(iii) Nonvested interest.--The term `nonvested interest'
means, with respect to any beneficiary, any interest in a
trust which is not a vested interest. Such interest shall be
determined by assuming the maximum exercise of discretion in
favor of the beneficiary and the occurrence of all
contingencies in favor of the beneficiary.
``(iv) Adjustments.--The Secretary may provide for such
adjustments to the bases of assets in a trust or a deferred
tax account, and the timing of such adjustments, in order to
ensure that gain is taxed only once.
``(v) Coordination with retirement plan rules.--This
subsection shall not apply to an interest in a trust which is
part of a retirement plan to which subsection (d)(2) applies.
``(3) Determination of beneficiaries' interest in trust.--
``(A) Determinations under paragraph (1).--For purposes of
paragraph (1), a beneficiary's interest in a trust shall be
based upon all relevant facts and circumstances, including
the terms of the trust instrument and any letter of wishes or
similar document, historical patterns of trust distributions,
and the existence of and functions performed by a trust
protector or any similar adviser.
``(B) Other determinations.--For purposes of this section--
``(i) Constructive ownership.--If a beneficiary of a trust
is a corporation, partnership, trust, or estate, the
shareholders, partners, or beneficiaries shall be deemed to
be the trust beneficiaries for purposes of this section.
``(ii) Taxpayer return position.--A taxpayer shall clearly
indicate on its income tax return--
``(I) the methodology used to determine that taxpayer's
trust interest under this section, and
``(II) if the taxpayer knows (or has reason to know) that
any other beneficiary of such trust is using a different
methodology to determine such beneficiary's trust interest
under this section.
``(g) Termination of Deferrals, etc.--In the case of any
covered expatriate, notwithstanding any other provision of
this title--
``(1) any period during which recognition of income or gain
is deferred shall terminate on the day before the
expatriation date, and
``(2) any extension of time for payment of tax shall cease
to apply on the day before the expatriation date and the
unpaid portion of such tax shall be due and payable at the
time and in the manner prescribed by the Secretary.
[[Page S6358]]
``(h) Imposition of Tentative Tax.--
``(1) In general.--If an individual is required to include
any amount in gross income under subsection (a) for any
taxable year, there is hereby imposed, immediately before the
expatriation date, a tax in an amount equal to the amount of
tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.
``(2) Due date.--The due date for any tax imposed by
paragraph (1) shall be the 90th day after the expatriation
date.
``(3) Treatment of tax.--Any tax paid under paragraph (1)
shall be treated as a payment of the tax imposed by this
chapter for the taxable year to which subsection (a) applies.
``(4) Deferral of tax.--The provisions of subsection (b)
shall apply to the tax imposed by this subsection to the
extent attributable to gain includible in gross income by
reason of this section.
``(i) Special Liens for Deferred Tax Amounts.--
``(1) Imposition of lien.--
``(A) In general.--If a covered expatriate makes an
election under subsection (a)(4) or (b) which results in the
deferral of any tax imposed by reason of subsection (a), the
deferred amount (including any interest, additional amount,
addition to tax, assessable penalty, and costs attributable
to the deferred amount) shall be a lien in favor of the
United States on all property of the expatriate located in
the United States (without regard to whether this section
applies to the property).
``(B) Deferred amount.--For purposes of this subsection,
the deferred amount is the amount of the increase in the
covered expatriate's income tax which, but for the election
under subsection (a)(4) or (b), would have occurred by reason
of this section for the taxable year including the
expatriation date.
``(2) Period of lien.--The lien imposed by this subsection
shall arise on the expatriation date and continue until--
``(A) the liability for tax by reason of this section is
satisfied or has become unenforceable by reason of lapse of
time, or
``(B) it is established to the satisfaction of the
Secretary that no further tax liability may arise by reason
of this section.
``(3) Certain rules apply.--The rules set forth in
paragraphs (1), (3), and (4) of section 6324A(d) shall apply
with respect to the lien imposed by this subsection as if it
were a lien imposed by section 6324A.
``(j) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Inclusion in Income of Gifts and Bequests Received by
United States Citizens and Residents From Expatriates.--
Section 102 (relating to gifts, etc. not included in gross
income) is amended by adding at the end the following new
subsection:
``(d) Gifts and Inheritances From Covered Expatriates.--
``(1) In general.--Subsection (a) shall not exclude from
gross income the value of any property acquired by gift,
bequest, devise, or inheritance from a covered expatriate
after the expatriation date. For purposes of this subsection,
any term used in this subsection which is also used in
section 877A shall have the same meaning as when used in
section 877A.
``(2) Exceptions for transfers otherwise subject to estate
or gift tax.--Paragraph (1) shall not apply to any property
if either--
``(A) the gift, bequest, devise, or inheritance is--
``(i) shown on a timely filed return of tax imposed by
chapter 12 as a taxable gift by the covered expatriate, or
``(ii) included in the gross estate of the covered
expatriate for purposes of chapter 11 and shown on a timely
filed return of tax imposed by chapter 11 of the estate of
the covered expatriate, or
``(B) no such return was timely filed but no such return
would have been required to be filed even if the covered
expatriate were a citizen or long-term resident of the United
States.''.
(c) Definition of Termination of United States
Citizenship.--Section 7701(a) is amended by adding at the end
the following new paragraph:
``(48) Termination of united states citizenship.--
``(A) In general.--An individual shall not cease to be
treated as a United States citizen before the date on which
the individual's citizenship is treated as relinquished under
section 877A(e)(3).
``(B) Dual citizens.--Under regulations prescribed by the
Secretary, subparagraph (A) shall not apply to an individual
who became at birth a citizen of the United States and a
citizen of another country.''.
(d) Ineligibility for Visa or Admission to United States.--
(1) In general.--Section 212(a)(10)(E) of the Immigration
and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to
read as follows:
``(E) Former citizens not in compliance with expatriation
revenue provisions.--Any alien who is a former citizen of the
United States who relinquishes United States citizenship
(within the meaning of section 877A(e)(3) of the Internal
Revenue Code of 1986) and who is not in compliance with
section 877A of such Code (relating to expatriation).''.
(2) Availability of information.--
(A) In general.--Section 6103(l) (relating to disclosure of
returns and return information for purposes other than tax
administration) is amended by adding at the end the following
new paragraph:
``(19) Disclosure to deny visa or admission to certain
expatriates.--Upon written request of the Attorney General or
the Attorney General's delegate, the Secretary shall disclose
whether an individual is in compliance with section 877A (and
if not in compliance, any items of noncompliance) to officers
and employees of the Federal agency responsible for
administering section 212(a)(10)(E) of the Immigration and
Nationality Act solely for the purpose of, and to the extent
necessary in, administering such section 212(a)(10)(E).''.
(B) Safeguards.--
(i) Technical amendments.--Paragraph (4) of section 6103(p)
of the Internal Revenue Code of 1986, as amended by section
202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210;
116 Stat. 961), is amended by striking ``or (17)'' after
``any other person described in subsection (l)(16)'' each
place it appears and inserting ``or (18)''.
(ii) Conforming amendments.--Section 6103(p)(4) (relating
to safeguards), as amended by clause (i), is amended by
striking ``or (18)'' after ``any other person described in
subsection (l)(16)'' each place it appears and inserting
``(18), or (19)''.
(3) Effective dates.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to
individuals who relinquish United States citizenship on or
after the date of the enactment of this Act.
(B) Technical amendments.--The amendments made by paragraph
(2)(B)(i) shall take effect as if included in the amendments
made by section 202(b)(2)(B) of the Trade Act of 2002 (Public
Law 107-210; 116 Stat. 961).
(e) Conforming Amendments.--
(1) Section 877 is amended by adding at the end the
following new subsection:
``(g) Application.--This section shall not apply to an
expatriate (as defined in section 877A(e)) whose expatriation
date (as so defined) occurs on or after February 5, 2003.''.
(2) Section 2107 is amended by adding at the end the
following new subsection:
``(f) Application.--This section shall not apply to any
expatriate subject to section 877A.''.
(3) Section 2501(a)(3) is amended by adding at the end the
following new subparagraph:
``(F) Application.--This paragraph shall not apply to any
expatriate subject to section 877A.''.
(4)(A) Paragraph (1) of section 6039G(d) is amended by
inserting ``or 877A'' after ``section 877''.
(B) The second sentence of section 6039G(e) is amended by
inserting ``or who relinquishes United States citizenship
(within the meaning of section 877A(e)(3))'' after
``877(a))''.
(C) Section 6039G(f) is amended by inserting ``or
877A(e)(2)(B)'' after ``877(e)(1)''.
(f) Clerical Amendment.--The table of sections for subpart
A of part II of subchapter N of chapter 1 is amended by
inserting after the item relating to section 877 the
following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(g) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates
(within the meaning of section 877A(e) of the Internal
Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs on or after February
5, 2003.
(2) Gifts and bequests.--Section 102(d) of the Internal
Revenue Code of 1986 (as added by subsection (b)) shall apply
to gifts and bequests received on or after February 5, 2003,
from an individual or the estate of an individual whose
expatriation date (as so defined) occurs after such date.
(3) Due date for tentative tax.--The due date under section
877A(h)(2) of the Internal Revenue Code of 1986, as added by
this section, shall in no event occur before the 90th day
after the date of the enactment of this Act.
SEC. 341. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.
(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.
``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
[[Page S6359]]
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.
Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base In Certain
Inversion Transactions To Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',
then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).
For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any income or gain required to be
recognized under section 304, 311(b), 367, 1001, or 1248, or
under any other provision of chapter 1, by reason of the
transfer during the applicable period of stock or other
properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.
The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and such deficiency may
be assessed before the expiration of such 3-year period
notwithstanding the provisions of any other law or rule of
law which would otherwise prevent such assessment.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not filed in good faith or does not
substantially comply with such requirements.
If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.
``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
[[Page S6360]]
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--
``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is under such common control with any member
of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.
``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved in
transactions to which section 7874 of such Code (as added by
subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:
``Sec. 7874. Rules relating to inverted corporate entities.''.
(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.
SEC. 342. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.
(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:
``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS
``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.
``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.
``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only If Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.
``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
[[Page S6361]]
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).
Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or to any specified stock
compensation (as defined in section 5000A) on which tax is
imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:
``Chapter 48. Stock compensation of insiders in inverted
corporations.''.
(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and (e)(1) of section 5000A of
the Internal Revenue Code of 1986, as added by this section.
SEC. 343. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.
(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.
PART II--OTHER PROVISIONS
SEC. 344. DOUBLING OF CERTAIN PENALTIES, FINES, AND INTEREST
ON UNDERPAYMENTS RELATED TO CERTAIN OFFSHORE
FINANCIAL ARRANGEMENT.
(a) General Rule.--If--
(1) a taxpayer eligible to participate in the Department of
the Treasury's Offshore Voluntary Compliance Initiative did
not participate in such initiative, and
(2) any interest or applicable penalty is imposed with
respect to any arrangement to which such initiative applied
or to any underpayment of Federal income tax attributable to
items arising in connection with such arrangement,
then, notwithstanding any other provision of law, the amount
of such interest or penalty shall be equal to twice that
determined without regard to this section.
(b) Definitions and Rules.--For purposes of this section--
(1) Applicable penalty.--The term ``applicable penalty''
means any penalty, addition to tax, or fine imposed under
chapter 68 of the Internal Revenue Code of 1986.
(2) Voluntary offshore compliance initiative.--The term
``Voluntary Offshore Compliance Initiative'' means the
program established by the Department of the Treasury in
January of 2003 under which any taxpayer was eligible to
voluntarily disclose previously undisclosed income on assets
placed in offshore accounts and accessed through credit card
and other financial arrangements.
(3) Participation.--A taxpayer shall be treated as having
participated in the Voluntary Offshore Compliance Initiative
if the taxpayer submitted the request in a timely manner and
all information requested by the Secretary of the Treasury or
his delegate within a reasonable period of time following the
request.
(c) Effective Date.--The provisions of this section shall
apply to interest penalties, additions to tax, and fines with
respect to any taxable year if as of May 8, 2003, the
assessment of any tax, penalty, or interest with respect to
such taxable year is not prevented by the operation of any
law or rule of law.
SEC. 345. EFFECTIVELY CONNECTED INCOME TO INCLUDE CERTAIN
FOREIGN SOURCE INCOME.
(a) In General.--Section 864(c)(4)(B) (relating to
treatment of income from sources without the United States as
effectively connected income) is amended by adding at the end
the following new flush sentence:
``Any income or gain which is equivalent to any item of
income or gain described in clause (i), (ii), or (iii) shall
be treated in the same manner as such item for purposes of
this subparagraph.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 346. DETERMINATION OF BASIS OF AMOUNTS PAID FROM FOREIGN
PENSION PLANS.
(a) In General.--Section 72 (relating to annuities and
certain proceeds of endowment and life insurance contracts)
is amended by redesignating subsection (w) as subsection (x)
by inserting subsection (v) the following new subsection:
``(w) Determination of Basis of Foreign Pension Plans.--
Notwithstanding any other provision of this section, for
purposes of determining the portion of any distribution from
a foreign pension plan which is includible in gross income of
the distributee, the investment in the contract with respect
to the plan shall not include employer or employee
contributions to the plan (or any earnings on such
contributions) unless such contributions or earnings were
subject to taxation by the United States or any foreign
government.''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions on or after the date of the
enactment of this Act.
SEC. 347. RECAPTURE OF OVERALL FOREIGN LOSSES ON SALE OF
CONTROLLED FOREIGN CORPORATION.
(a) In General.--Section 904(f)(3) (relating to
dispositions) is amending by adding at the end the following
new subparagraph:
``(D) Application to dispositions of stock in controlled
foreign corporations.--In the case of any disposition by a
taxpayer of any share of stock in a controlled foreign
corporation (as defined in section 957), this paragraph shall
apply to such disposition in the same manner as if it were a
disposition of property described in subparagraph (A), except
that the exception contained in subparagraph (C)(i) shall not
apply.''.
(b) Effective Date.--The amendment made by this section
shall apply to dispositions after the date of the enactment
of this Act.
[[Page S6362]]
SEC. 348. PREVENTION OF MISMATCHING OF INTEREST AND ORIGINAL
ISSUE DISCOUNT DEDUCTIONS AND INCOME INCLUSIONS
IN TRANSACTIONS WITH RELATED FOREIGN PERSONS.
(a) Original Issue Discount.--Section 163(e)(3) (relating
to special rule for original issue discount on obligation
held by related foreign person) is amended by redesignating
subparagraph (B) as subparagraph (C) and by inserting after
subparagraph (A) the following new subparagraph:
``(B) Special rule for certain foreign entities.--
Notwithstanding subparagraph (A) (and any regulations
thereunder), in the case of any debt instrument having
original issue discount which is held by a related foreign
person which is a foreign personal holding company (as
defined in section 552), a controlled foreign corporation (as
defined in section 957), or a passive foreign investment
company (as defined in section 1297), a deduction shall be
allowable to the issuer with respect to such original issue
discount for any taxable year only to the extent such
original issue discount is included during such taxable year
in the gross income of a United States person who owns
(within the meaning of section 958(a)) stock in such
corporation. For purposes of this subparagraph, the
determination as to the proper allocation of the original
issue discount to shareholders shall be made in such manner
as the Secretary may prescribe.''.
(b) Interest and Other Deductible Amounts.--Section
267(a)(3) is amended--
(1) by striking ``The Secretary'' and inserting:
``(A) In general.--The Secretary'', and
(2) by adding at the end the following new subparagraph:
``(B) Special rule for certain foreign entities.--
Notwithstanding any regulations issued under subparagraph
(A), in the case of any amount payable to a foreign personal
holding company (as defined in section 552), a controlled
foreign corporation (as defined in section 957), or a passive
foreign investment company (as defined in section 1297), a
deduction shall be allowable to the payor with respect to
such amount for any taxable year only to the extent such
amount is included during such taxable year in the gross
income of a United States person who owns (within the meaning
of section 958(a)) stock in such corporation. For purposes of
this subparagraph, the determination as to the proper
allocation of such amount to shareholders shall be made in
such manner as the Secretary may prescribe.''.
(c) Effective Date.--The amendments made by this section
shall apply to payments accrued on or after May 8, 2003.
SEC. 349. SALE OF GASOLINE AND DIESEL FUEL AT DUTY-FREE SALES
ENTERPRISES.
(a) Prohibition.--Section 555(b) of the Tariff Act of 1930
(19 U.S.C. 1555(b)) is amended--
(1) by redesignating paragraphs (6) through (8) as
paragraphs (7) through (9), respectively; and
(2) by inserting after paragraph (5) the following:
``(6) Any gasoline or diesel fuel sold at a duty-free sales
enterprise shall be considered to be entered for consumption
into the customs territory of the United States.''.
(b) Construction.--The amendments made by this section
shall not be construed to create any inference with respect
to the interpretation of any provision of law as such
provision was in effect on the day before the date of
enactment of this Act.
(c) Effective date.--The amendments made by this section
shall take effect on the date of enactment of this Act.
SEC. 350. REPEAL OF EARNED INCOME EXCLUSION OF CITIZENS OR
RESIDENTS LIVING ABROAD.
(a) Repeal.--Section 911 (relating to citizens or residents
living abroad) is amended by adding at the end the following
new subsection:
``(g) Termination.--This section shall not apply to any
taxable year beginning after December 31, 2003.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
Subtitle E--Other Revenue Provisions
SEC. 352. ADDITION OF VACCINES AGAINST HEPATITIS A TO LIST OF
TAXABLE VACCINES.
(a) In General.--Section 4132(a)(1) (defining taxable
vaccine) is amended by redesignating subparagraphs (I), (J),
(K), and (L) as subparagraphs (J), (K), (L), and (M),
respectively, and by inserting after subparagraph (H) the
following new subparagraph:
``(I) Any vaccine against hepatitis A.''.
(b) Conforming Amendment.--Section 9510(c)(1)(A) is amended
by striking ``October 18, 2000'' and inserting ``May 8,
2003''.
(c) Effective Date.--
(1) Sales, etc.--The amendments made by this section shall
apply to sales and uses on or after the first day of the
first month which begins more than 4 weeks after the date of
the enactment of this Act.
(2) Deliveries.--For purposes of paragraph (1) and section
4131 of the Internal Revenue Code of 1986, in the case of
sales on or before the effective date described in such
paragraph for which delivery is made after such date, the
delivery date shall be considered the sale date.
SEC. 353. DISALLOWANCE OF CERTAIN PARTNERSHIP LOSS TRANSFERS.
(a) Treatment of Contributed Property With Built-In Loss.--
Paragraph (1) of section 704(c) is amended by striking
``and'' at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting ``,
and'', and by adding at the end the following:
``(C) if any property so contributed has a built-in loss--
``(i) such built-in loss shall be taken into account only
in determining the amount of items allocated to the
contributing partner, and
``(ii) except as provided in regulations, in determining
the amount of items allocated to other partners, the basis of
the contributed property in the hands of the partnership
shall be treated as being equal to its fair market value
immediately after the contribution.
For purposes of subparagraph (C), the term `built-in loss'
means the excess of the adjusted basis of the property
(determined without regard to subparagraph (C)(ii)) over its
fair market value immediately after the contribution.''.
(b) Adjustment to Basis of Partnership Property on Transfer
of Partnership Interest if There Is Substantial Built-In
Loss.--
(1) Adjustment required.--Subsection (a) of section 743
(relating to optional adjustment to basis of partnership
property) is amended by inserting before the period ``or
unless the partnership has a substantial built-in loss
immediately after such transfer''.
(2) Adjustment.--Subsection (b) of section 743 is amended
by inserting ``or with respect to which there is a
substantial built-in loss immediately after such transfer''
after ``section 754 is in effect''.
(3) Substantial built-in loss.--Section 743 is amended by
adding at the end the following new subsection:
``(d) Substantial Built-In Loss.--
``(1) In general.--For purposes of this section, a
partnership has a substantial built-in loss with respect to a
transfer of an interest in a partnership if the transferee
partner's proportionate share of the adjusted basis of the
partnership property exceeds by more than $250,000 the basis
of such partner's interest in the partnership.
``(2) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of paragraph (1) and section 734(d), including regulations
aggregating related partnerships and disregarding property
acquired by the partnership in an attempt to avoid such
purposes.''.
(4) Clerical amendments.--
(A) The section heading for section 743 is amended to read
as follows:
``SEC. 743. ADJUSTMENT TO BASIS OF PARTNERSHIP PROPERTY WHERE
SECTION 754 ELECTION OR SUBSTANTIAL BUILT-IN
LOSS.''.
(B) The table of sections for subpart C of part II of
subchapter K of chapter 1 is amended by striking the item
relating to section 743 and inserting the following new item:
``Sec. 743. Adjustment to basis of partnership property where section
754 election or substantial built-in loss.''.
(c) Adjustment to Basis of Undistributed Partnership
Property if There Is Substantial Basis Reduction.--
(1) Adjustment required.--Subsection (a) of section 734
(relating to optional adjustment to basis of undistributed
partnership property) is amended by inserting before the
period ``or unless there is a substantial basis reduction''.
(2) Adjustment.--Subsection (b) of section 734 is amended
by inserting ``or unless there is a substantial basis
reduction'' after ``section 754 is in effect''.
(3) Substantial basis reduction.--Section 734 is amended by
adding at the end the following new subsection:
``(d) Substantial Basis Reduction.--
``(1) In general.--For purposes of this section, there is a
substantial basis reduction with respect to a distribution if
the sum of the amounts described in subparagraphs (A) and (B)
of subsection (b)(2) exceeds $250,000.
``(2) Regulations.--
``For regulations to carry out this subsection, see section
743(d)(2).''.
(4) Clerical amendments.--
(A) The section heading for section 734 is amended to read
as follows:
``SEC. 734. ADJUSTMENT TO BASIS OF UNDISTRIBUTED PARTNERSHIP
PROPERTY WHERE SECTION 754 ELECTION OR
SUBSTANTIAL BASIS REDUCTION.''.
(B) The table of sections for subpart B of part II of
subchapter K of chapter 1 is amended by striking the item
relating to section 734 and inserting the following new item:
``Sec. 734. Adjustment to basis of undistributed partnership property
where section 754 election or substantial basis
reduction.''.
(d) Effective Dates.--
(1) Subsection (a).--The amendment made by subsection (a)
shall apply to contributions made after the date of the
enactment of this Act.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to transfers after the date of the enactment of
this Act.
(3) Subsection (c).--The amendments made by subsection (c)
shall apply to distributions after the date of the enactment
of this Act.
[[Page S6363]]
SEC. 354. TREATMENT OF STRIPPED INTERESTS IN BOND AND
PREFERRED STOCK FUNDS, ETC.
(a) In General.--Section 1286 (relating to tax treatment of
stripped bonds) is amended by redesignating subsection (f) as
subsection (g) and by inserting after subsection (e) the
following new subsection:
``(f) Treatment of Stripped Interests in Bond and Preferred
Stock Funds, Etc.--In the case of an account or entity
substantially all of the assets of which consist of bonds,
preferred stock, or a combination thereof, the Secretary may
by regulations provide that rules similar to the rules of
this section and 305(e), as appropriate, shall apply to
interests in such account or entity to which (but for this
subsection) this section or section 305(e), as the case may
be, would not apply.''.
(b) Cross Reference.--Subsection (e) of section 305 is
amended by adding at the end the following new paragraph:
``(7) Cross reference.--
``For treatment of stripped interests in certain accounts or entities
holding preferred stock, see section 1286(f).''.
(c) Effective Date.--The amendments made by this section
shall apply to purchases and dispositions after the date of
the enactment of this Act.
SEC. 355. REPORTING OF TAXABLE MERGERS AND ACQUISITIONS.
(a) In General.--Subpart B of part III of subchapter A of
chapter 61 is amended by inserting after section 6043 the
following new section:
``SEC. 6043A. TAXABLE MERGERS AND ACQUISITIONS.
``(a) In General.--The acquiring corporation in any taxable
acquisition shall make a return (according to the forms or
regulations prescribed by the Secretary) setting forth--
``(1) a description of the acquisition,
``(2) the name and address of each shareholder of the
acquired corporation who is required to recognize gain (if
any) as a result of the acquisition,
``(3) the amount of money and the fair market value of
other property transferred to each such shareholder as part
of such acquisition, and
``(4) such other information as the Secretary may
prescribe.
To the extent provided by the Secretary, the requirements of
this section applicable to the acquiring corporation shall be
applicable to the acquired corporation and not to the
acquiring corporation.
``(b) Nominee Reporting.--Any person who holds stock as a
nominee for another person shall furnish in the manner
prescribed by the Secretary to such other person the
information provided by the corporation under subsection (d).
``(c) Taxable Acquisition.--For purposes of this section,
the term `taxable acquisition' means any acquisition by a
corporation of stock in or property of another corporation if
any shareholder of the acquired corporation is required to
recognize gain (if any) as a result of such acquisition.
``(d) Statements to Be Furnished to Shareholders.--Every
person required to make a return under subsection (a) shall
furnish to each shareholder whose name is required to be set
forth in such return a written statement showing--
``(1) the name, address, and phone number of the
information contact of the person required to make such
return,
``(2) the information required to be shown on such return
with respect to such shareholder, and
``(3) such other information as the Secretary may
prescribe.
The written statement required under the preceding sentence
shall be furnished to the shareholder on or before January 31
of the year following the calendar year during which the
taxable acquisition occurred.''.
(b) Assessable Penalties.--
(1) Subparagraph (B) of section 6724(d)(1) (relating to
definitions) is amended by redesignating clauses (ii) through
(xvii) as clauses (iii) through (xviii), respectively, and by
inserting after clause (i) the following new clause:
``(ii) section 6043A(a) (relating to returns relating to
taxable mergers and acquisitions),''.
(2) Paragraph (2) of section 6724(d) is amended by
redesignating subparagraphs (F) through (AA) as subparagraphs
(G) through (BB), respectively, and by inserting after
subparagraph (E) the following new subparagraph:
``(F) subsections (b) and (d) of section 6043A (relating to
returns relating to taxable mergers and acquisitions).''.
(c) Clerical Amendment.--The table of sections for subpart
B of part III of subchapter A of chapter 61 is amended by
inserting after the item relating to section 6043 the
following new item:
``Sec. 6043A. Returns relating to taxable mergers and acquisitions.''.
(d) Effective Date.--The amendments made by this section
shall apply to acquisitions after the date of the enactment
of this Act.
SEC. 356. MINIMUM HOLDING PERIOD FOR FOREIGN TAX CREDIT ON
WITHHOLDING TAXES ON INCOME OTHER THAN
DIVIDENDS.
(a) In General.--Section 901 is amended by redesignating
subsection (l) as subsection (m) and by inserting after
subsection (k) the following new subsection:
``(l) Minimum Holding Period for Withholding Taxes on Gain
and Income Other than Dividends Etc.--
``(1) In general.--In no event shall a credit be allowed
under subsection (a) for any withholding tax (as defined in
subsection (k)) on any item of income or gain with respect to
any property if--
``(A) such property is held by the recipient of the item
for 15 days or less during the 30-day period beginning on the
date which is 15 days before the date on which the right to
receive payment of such item arises, or
``(B) to the extent that the recipient of the item is under
an obligation (whether pursuant to a short sale or otherwise)
to make related payments with respect to positions in
substantially similar or related property.
This paragraph shall not apply to any dividend to which
subsection (k) applies.
``(2) Exception for taxes paid by dealers.--
``(A) In general.--Paragraph (1) shall not apply to any
qualified tax with respect to any property held in the active
conduct in a foreign country of a business as a dealer in
such property.
``(B) Qualified tax.--For purposes of subparagraph (A), the
term `qualified tax' means a tax paid to a foreign country
(other than the foreign country referred to in subparagraph
(A)) if--
``(i) the item to which such tax is attributable is subject
to taxation on a net basis by the country referred to in
subparagraph (A), and
``(ii) such country allows a credit against its net basis
tax for the full amount of the tax paid to such other foreign
country.
``(C) Dealer.--For purposes of subparagraph (A), the term
`dealer' means--
``(i) with respect to a security, any person to whom
paragraphs (1) and (2) of subsection (k) would not apply by
reason of paragraph (4) thereof if such security were stock,
and
``(ii) with respect to any other property, any person with
respect to whom such property is described in section
1221(a)(1).
``(D) Regulations.--The Secretary may prescribe such
regulations as may be appropriate to carry out this
paragraph, including regulations to prevent the abuse of the
exception provided by this paragraph and to treat other taxes
as qualified taxes.
``(3) Exceptions.--The Secretary may by regulation provide
that paragraph (1) shall not apply to property where the
Secretary determines that the application of paragraph (1) to
such property is not necessary to carry out the purposes of
this subsection.
``(4) Certain rules to apply.--Rules similar to the rules
of paragraphs (5), (6), and (7) of subsection (k) shall apply
for purposes of this subsection.
``(5) Determination of holding period.--Holding periods
shall be determined for purposes of this subsection without
regard to section 1235 or any similar rule.''.
(b) Conforming Amendment.--The heading of subsection (k) of
section 901 is amended by inserting ``on Dividends'' after
``Taxes''.
(c) Effective Date.--The amendments made by this section
shall apply to amounts paid or accrued more than 30 days
after the date of the enactment of this Act.
SEC. 357. QUALIFIED TAX COLLECTION CONTRACTS.
(a) Contract Requirements.--
(1) In general.--Subchapter A of chapter 64 (relating to
collection) is amended by adding at the end the following new
section:
``SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS.
``(a) In General.--Nothing in any provision of law shall be
construed to prevent the Secretary from entering into a
qualified tax collection contract.
``(b) Qualified Tax Collection Contract.--For purposes of
this section, the term `qualified tax collection contract'
means any contract which--
``(1) is for the services of any person (other than an
officer or employee of the Treasury Department) to locate and
contact any taxpayer specified by the Secretary, to request
payment from such taxpayer of an amount of Federal tax
specified by the Secretary, and to obtain financial
information specified by the Secretary with respect to such
taxpayer, and
``(2) prohibits each person providing such services under
such contract from committing any act or omission which
employees of the Internal Revenue Service are prohibited from
committing in the performance of similar services.
``(c) Fees.--The Secretary may retain and use an amount not
in excess of 25 percent of the amount collected under any
qualified tax collection contract for the costs of services
performed under such contract. The Secretary shall keep
adequate records regarding amounts so retained and used. The
amount credited as paid by any taxpayer shall be determined
without regard to this subsection.
``(d) No Federal Liability.--The United States shall not be
liable for any act or omission of any person performing
services under a qualified tax collection contract.
``(e) Application of Fair Debt Collection Practices Act.--
The provisions of the Fair Debt Collection Practices Act (15
U.S.C. 1692 et seq.) shall apply to any qualified tax
collection contract, except to the extent superseded by any
provision of this title.
``(f) Cross References.--
``(1) For damages for certain unauthorized collection
actions by persons performing services under a qualified tax
collection contract, see section 7433A.
``(2) For application of Taxpayer Assistance Orders to
persons performing services
[[Page S6364]]
under a qualified tax collection contract, see section
7811(a)(4).''.
(2) Conforming amendments.--
(A) Section 7809(a) is amended by inserting ``6306,''
before ``7651''.
(B) The table of sections for subchapter A of chapter 64 is
amended by adding at the end the following new item:
``Sec. 6306. Qualified Tax Collection Contracts.''.
(b) Civil Damages for Certain Unauthorized Collection
Actions by Persons Performing Services Under Qualified Tax
Collection Contracts.--
(1) In general.--Subchapter B of chapter 76 (relating to
proceedings by taxpayers and third parties) is amended by
inserting after section 7433 the following new section:
``SEC. 7433A. CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED
COLLECTION ACTIONS BY PERSONS PERFORMING
SERVICES UNDER QUALIFIED TAX COLLECTION
CONTRACTS.
``(a) In General.--Subject to the modifications provided by
subsection (b), section 7433 shall apply to the acts and
omissions of any person performing services under a qualified
tax collection contract (as defined in section 6306(b)) to
the same extent and in the same manner as if such person were
an employee of the Internal Revenue Service.
``(b) Modifications.--For purposes of subsection (a)--
``(1) Any civil action brought under section 7433 by reason
of this section shall be brought against the person who
entered into the qualified tax collection contract with the
Secretary and shall not be brought against the United States.
``(2) Such person and not the United States shall be liable
for any damages and costs determined in such civil action.
``(3) Such civil action shall not be an exclusive remedy
with respect to such person.
``(4) Subsections (c) and (d)(1) of section 7433 shall not
apply.''.
(2) Clerical amendment.--The table of sections for
subchapter B of chapter 76 is amended by inserting after the
item relating to section 7433 the following new item:
``Sec. 7433A. Civil damages for certain unauthorized collection actions
by persons performing services under a qualified tax
collection contract.''.
(c) Application of Taxpayer Assistance Orders to Persons
Performing Services Under a Qualified Tax Collection
Contract.--Section 7811 (relating to taxpayer assistance
orders) is amended by adding at the end the following new
subsection:
``(g) Application to Persons Performing Services Under a
Qualified Tax Collection Contract.--Any order issued or
action taken by the National Taxpayer Advocate pursuant to
this section shall apply to persons performing services under
a qualified tax collection contract (as defined in section
6306(b)) to the same extent and in the same manner as such
order or action applies to the Secretary.''.
(d) Ineligibility of Individuals who Commit Misconduct to
Perform Under Contract.--Section 1203 of the Internal Revenue
Service Restructuring Act of 1998 (relating to termination of
employment for misconduct) is amended by adding at the end
the following new subsection:
``(e) Individuals Performing Services Under a Qualified Tax
Collection Contract.-- An individual shall cease to be
permitted to perform any services under any qualified tax
collection contract (as defined in section 6306(b) of the
Internal Revenue Code of 1986) if there is a final
determination by the Secretary of the Treasury under such
contract that such individual committed any act or omission
described under subsection (b) in connection with the
performance of such services.''.
(e) Effective Date.--The amendments made to this section
shall take effect on the date of the enactment of this Act.
SEC. 358. EXTENSION OF CUSTOMS USER FEES.
Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended
by striking ``September 30, 2003'' and inserting ``September
30, 2013''.
SEC. 359. CLARIFICATION OF EXEMPTION FROM TAX FOR SMALL
PROPERTY AND CASUALTY INSURANCE COMPANIES.
(a) In General.--Section 501(c)(15)(A) is amended to read
as follows:
``(A) Insurance companies or associations other than life
(including interinsurers and reciprocal underwriters) if--
``(i) the gross receipts for the taxable year do not exceed
$600,000, and
``(ii) more than 50 percent of such gross receipts consist
of premiums.''.
(b) Controlled Group Rule.--Section 501(c)(15)(C) is
amended by inserting ``, except that in applying section 1563
for purposes of section 831(b)(2)(B)(ii), subparagraphs (B)
and (C) of section 1563(b)(2) shall be disregarded'' before
the period at the end.
(c) Conforming Amendment.--Clause (i) of section
831(b)(2)(A) is amended by striking ``exceed $350,000 but''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 360. PARTIAL PAYMENT OF TAX LIABILITY IN INSTALLMENT
AGREEMENTS.
(a) In General.--
(1) Section 6159(a) (relating to authorization of
agreements) is amended--
(A) by striking ``satisfy liability for payment of'' and
inserting ``make payment on'', and
(B) by inserting ``full or partial'' after ``facilitate''.
(2) Section 6159(c) (relating to Secretary required to
enter into installment agreements in certain cases) is
amended in the matter preceding paragraph (1) by inserting
``full'' before ``payment''.
(b) Requirement To Review Partial Payment Agreements Every
Two Years.--Section 6159 is amended by redesignating
subsections (d) and (e) as subsections (e) and (f),
respectively, and inserting after subsection (c) the
following new subsection:
``(d) Secretary Required To Review Installment Agreements
for Partial Collection Every Two Years.--In the case of an
agreement entered into by the Secretary under subsection (a)
for partial collection of a tax liability, the Secretary
shall review the agreement at least once every 2 years.''.
(c) Effective Date.--The amendments made by this section
shall apply to agreements entered into on or after the date
of the enactment of this Act.
SEC. 361. EXTENSION OF AMORTIZATION OF INTANGIBLES TO SPORTS
FRANCHISES.
(a) In General.--Section 197(e) (relating to exceptions to
definition of section 197 intangible) is amended by striking
paragraph (6) and by redesignating paragraphs (7) and (8) as
paragraphs (6) and (7), respectively.
(b) Conforming Amendments.--
(1)(A) Section 1056 (relating to basis limitation for
player contracts transferred in connection with the sale of a
franchise) is repealed.
(B) The table of sections for part IV of subchapter O of
chapter 1 is amended by striking the item relating to section
1056.
(2) Section 1253 (relating to transfers of franchises,
trademarks, and trade names) is amended by striking
subsection (e).
(c) Effective Date.--The amendments made by this section
shall apply to property acquired after the date of the
enactment of this Act.
SEC. 362. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS.
(a) In General.--Subchapter A of chapter 67 (relating to
interest on underpayments) is amended by adding at the end
the following new section:
``SEC. 6603. DEPOSITS MADE TO SUSPEND RUNNING OF INTEREST ON
POTENTIAL UNDERPAYMENTS, ETC.
``(a) Authority To Make Deposits Other Than As Payment of
Tax.--A taxpayer may make a cash deposit with the Secretary
which may be used by the Secretary to pay any tax imposed
under subtitle A or B or chapter 41, 42, 43, or 44 which has
not been assessed at the time of the deposit. Such a deposit
shall be made in such manner as the Secretary shall
prescribe.
``(b) No Interest Imposed.--To the extent that such deposit
is used by the Secretary to pay tax, for purposes of section
6601 (relating to interest on underpayments), the tax shall
be treated as paid when the deposit is made.
``(c) Return of Deposit.--Except in a case where the
Secretary determines that collection of tax is in jeopardy,
the Secretary shall return to the taxpayer any amount of the
deposit (to the extent not used for a payment of tax) which
the taxpayer requests in writing.
``(d) Payment of Interest.--
``(1) In general.--For purposes of section 6611 (relating
to interest on overpayments), a deposit which is returned to
a taxpayer shall be treated as a payment of tax for any
period to the extent (and only to the extent) attributable to
a disputable tax for such period. Under regulations
prescribed by the Secretary, rules similar to the rules of
section 6611(b)(2) shall apply.
``(2) Disputable tax.--
``(A) In general.--For purposes of this section, the term
`disputable tax' means the amount of tax specified at the
time of the deposit as the taxpayer's reasonable estimate of
the maximum amount of any tax attributable to disputable
items.
``(B) Safe harbor based on 30-day letter.--In the case of a
taxpayer who has been issued a 30-day letter, the maximum
amount of tax under subparagraph (A) shall not be less than
the amount of the proposed deficiency specified in such
letter.
``(3) Other definitions.--For purposes of paragraph (2)--
``(A) Disputable item.--The term `disputable item' means
any item of income, gain, loss, deduction, or credit if the
taxpayer--
``(i) has a reasonable basis for its treatment of such
item, and
``(ii) reasonably believes that the Secretary also has a
reasonable basis for disallowing the taxpayer's treatment of
such item.
``(B) 30-day letter.--The term `30-day letter' means the
first letter of proposed deficiency which allows the taxpayer
an opportunity for administrative review in the Internal
Revenue Service Office of Appeals.
``(4) Rate of interest.--The rate of interest allowable
under this subsection shall be the Federal short-term rate
determined under section 6621(b), compounded daily.
``(e) Use of Deposits.--
``(1) Payment of tax.--Except as otherwise provided by the
taxpayer, deposits shall be treated as used for the payment
of tax in the order deposited.
``(2) Returns of deposits.--Deposits shall be treated as
returned to the taxpayer on a last-in, first-out basis.''.
(b) Clerical Amendment.--The table of sections for
subchapter A of chapter 67 is
[[Page S6365]]
amended by adding at the end the following new item:
``Sec. 6603. Deposits made to suspend running of interest on potential
underpayments, etc.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to deposits made after the date of the enactment of
this Act.
(2) Coordination with deposits made under revenue procedure
84-58.--In the case of an amount held by the Secretary of the
Treasury or his delegate on the date of the enactment of this
Act as a deposit in the nature of a cash bond deposit
pursuant to Revenue Procedure 84-58, the date that the
taxpayer identifies such amount as a deposit made pursuant to
section 6603 of the Internal Revenue Code (as added by this
Act) shall be treated as the date such amount is deposited
for purposes of such section 6603.
SEC. 363. CLARIFICATION OF RULES FOR PAYMENT OF ESTIMATED TAX
FOR CERTAIN DEEMED ASSET SALES.
(a) In General.--Paragraph (13) of section 338(h) (relating
to tax on deemed sale not taken into account for estimated
tax purposes) is amended by adding at the end the following:
``The preceding sentence shall not apply with respect to a
qualified stock purchase for which an election is made under
paragraph (10).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to transactions occurring after the date of the
enactment of this Act.
SEC. 364. LIMITATION OF DEDUCTION FOR CHARITABLE
CONTRIBUTIONS OF PATENTS AND SIMILAR PROPERTY.
(a) In General.--Section 170(e)(1)(B) (relating to certain
contributions of ordinary income and capital gain property)
is amended by striking ``or'' at the end of clause (i), by
adding ``or'' at the end of clause (ii), and by inserting
after clause (ii) the following new clause:
``(iii) of any patent, copyright, trademark, trade name,
trade secret, know-how, software, or similar property, or
applications or registrations of such property,''.
(b) Anti-Abuse Rules.--The Secretary of the Treasury may
prescribe such regulations or other administrative guidance
as may be necessary or appropriate to prevent the avoidance
of the purposes of section 170(e)(1)(B)(iii) of the Internal
Revenue Code of 1986 (as added by subsection (a)), including
preventing--
(1) the circumvention of the reduction of the charitable
deduction by embedding or bundling the patent or similar
property as part of a charitable contribution of property
that includes the patent or similar property,
(2) the manipulation of the basis of the property to
increase the amount of the charitable deduction through the
use of related persons, pass-thru entities, or other
intermediaries, or through the use of any provision of law or
regulation (including the consolidated return regulations),
and
(3) a donor from changing the form of the patent or similar
property to property of a form for which different deduction
rules would apply.
(c) Effective Date.--The amendments made by this section
shall apply to contributions made after May 7, 2003.
SEC. 365. EXTENSION OF TRANSFERS OF EXCESS PENSION ASSETS TO
RETIREE HEALTH ACCOUNTS.
(a) Amendment of Internal Revenue Code of 1986.--Paragraph
(5) of section 420(b) (relating to expiration) is amended by
striking ``December 31, 2005'' and inserting ``December 31,
2013''.
(b) Amendments of ERISA.--
(1) Section 101(e)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1021(e)(3)) is amended by
striking ``Tax Relief Extension Act of 1999'' and inserting
``Jobs and Growth Reconciliation Tax Act of 2003''.
(2) Section 403(c)(1) of such Act (29 U.S.C. 1103(c)(1)) is
amended by striking ``Tax Relief Extension Act of 1999'' and
inserting ``Jobs and Growth Reconciliation Tax Act of 2003''.
(3) Paragraph (13) of section 408(b) of such Act (29 U.S.C.
1108(b)(3)) is amended--
(A) by striking ``January 1, 2006'' and inserting ``January
1, 2014'', and
(B) by striking ``Tax Relief Extension Act of 1999'' and
inserting ``Jobs and Growth Reconciliation Tax Act of 2003''.
SEC. 366. PRORATION RULES FOR LIFE INSURANCE BUSINESS OF
PROPERTY AND CASUALTY INSURANCE COMPANIES.
(a) In General.--Section 832(b)(4) (defining premiums
earned) is amended--
(1) by inserting ``, except that any deduction attributable
to such reserves shall be reduced in the same manner as the
deductions provided by sections 243, 244, and 245 for a life
insurance company are reduced under section 805(a)(4)''
before the period at the end of the first sentence following
subparagraph (C), and
(2) by adding at the end the following new sentence: ``In
applying section 812(d) for purposes of the reduction under
the third preceding sentence, only gross investment income
attributable to the reserves described in such sentence shall
be taken into account.''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
SEC. 367. MODIFICATION OF TREATMENT OF TRANSFERS TO CREDITORS
IN DIVISIVE REORGANIZATIONS.
(a) In General.--Section 361(b)(3) (relating to treatment
of transfers to creditors) is amended by adding at the end
the following new sentence: ``In the case of a reorganization
described in section 368(a)(1)(D) with respect to which stock
or securities of the corporation to which the assets are
transferred are distributed in a transaction which qualifies
under section 355, this paragraph shall apply only to the
extent that the money or other property transferred to such
creditors does not exceed the adjusted bases of such assets
transferred.''.
(b) Liabilities in Excess of Basis.--Section 357(c)(1)(B)
is amended by inserting ``with respect to which stock or
securities of the corporation to which the assets are
transferred are distributed in a transaction which qualifies
under section 355'' after ``section 368(a)(1)(D)''.
(c) Effective Date.--The amendments made by this section
shall apply to transfers of money or other property, or
liabilities assumed, in connection with a reorganization
occurring on or after the date of the enactment of this Act.
Subtitle F--Other Provisions
SEC. 371. REVIEW OF STATE AGENCY BLINDNESS AND DISABILITY
DETERMINATIONS.
Section 1633 of the Social Security Act (42 U.S.C. 1383b)
is amended by adding at the end the following:
``(e)(1) The Commissioner of Social Security shall review
determinations, made by State agencies pursuant to subsection
(a) in connection with applications for benefits under this
title on the basis of blindness or disability, that
individuals who have attained 18 years of age are blind or
disabled as of a specified onset date. The Commissioner of
Social Security shall review such a determination before any
action is taken to implement the determination.
``(2)(A) In carrying out paragraph (1), the Commissioner of
Social Security shall review--
``(i) at least 25 percent of all determinations referred to
in paragraph (1) that are made in fiscal year 2004; and
``(ii) at least 50 percent of all such determinations that
are made in fiscal year 2005 or thereafter.
``(B) In carrying out subparagraph (A), the Commissioner of
Social Security shall, to the extent feasible, select for
review the determinations which the Commissioner of Social
Security identifies as being the most likely to be
incorrect.''.
SEC. 372. PROHIBITION ON USE OF SCHIP FUNDS TO PROVIDE
COVERAGE FOR CHILDLESS ADULTS.
(a) General Limitations on Payments.--Section 2105(c)(1) of
the Social Security Act (42 U.S.C. 1397ee(c)(1)) is amended
by inserting before the period the following: ``and may not
include coverage of a childless adult unless the childless
adult is a pregnant woman. For purposes of the preceding
sentence, a caretaker relative (as such term is defined for
purposes of carrying out section 1931) shall not be
considered a childless adult.''.
(b) Limitation on Waiver Authority.--Section 2107 of the
Social Security Act (42 U.S.C. 1397gg) is amended by adding
at the end the following:
``(f) Limitation of Waiver Authority.--Notwithstanding
subsection (e)(2)(A) and section 1115(a), the Secretary may
not approve a waiver, experimental, pilot, or demonstration
project, or an amendment to such a project that has been
approved as of the date of enactment of this subsection, that
would allow funds made available under this title to be used
to provide child health assistance or other health benefits
coverage to a childless adult, other than a childless adult
who is a pregnant woman. For purposes of the preceding
sentence, a caretaker relative (as such term is defined for
purposes of carrying out section 1931) shall not be
considered a childless adult.''.
(c) Effective Date.--The amendments made by this section
take effect on the date of enactment of this Act and apply to
proposals to conduct a waiver, experimental, pilot, or
demonstration project affecting the State children's health
insurance program under title XXI of such Act, and to any
proposals to amend such a project, that are approved or
extended on or after such date of enactment.
(d) Rule of Construction.--Nothing in this section or the
amendments made by this section shall be construed to--
(1) authorize the waiver of any provision of title XXI of
the Social Security Act (42 U.S.C. 1397aa et seq.) that is
not otherwise authorized to be waived under such title or
under title XI of such Act (42 U.S.C. 1301 et seq.) as of the
date of enactment of this Act; or
(2) imply congressional approval of any waiver,
experimental, pilot, or demonstration project affecting the
State children's health insurance program under title XXI of
such Act that has been approved as of such date of enactment.
TITLE IV--APPLICATION OF SUNSET
SEC. 401. APPLICATION OF SUNSET TO TITLE III.
The amendments made by section 362 shall not apply to
taxable years beginning after December 31, 2012, and the
Internal Revenue Code of 1986 shall be applied and
administered to such years as if such amendments had never
been enacted.
[[Page S6366]]
TITLE V--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
SEC. 501. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT
COMPENSATION ACT OF 2002.
(a) In General.--Section 208 of the Temporary Extended
Unemployment Compensation Act of 2002 (Public Law 107-147;
116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3),
is amended--
(1) in subsection (a)(2), by striking ``before June 1'' and
inserting ``on or before November 30'';
(2) in subsection (b)(1), by striking ``May 31, 2003'' and
inserting ``November 30, 2003'';
(3) in subsection (b)(2)--
(A) in the heading, by striking ``may 31, 2003'' and
inserting ``november 30, 2003''; and
(B) by striking ``May 31, 2003'' and inserting ``November
30, 2003''; and
(4) in subsection (b)(3), by striking ``August 30, 2003''
and inserting ``February 28, 2004''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 21).
SEC. 502. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY
EXTENDED UNEMPLOYMENT COMPENSATION.
(a) Entitlement to Additional Weeks.--
(1) In general.--Paragraph (1) of section 203(b) of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 28) is amended--
(A) in subparagraph (A), by striking ``50 percent'' and
inserting ``100 percent''; and
(B) in subparagraph (B), by striking ``13 times'' and
inserting ``26 times''.
(2) Repeal of restriction on augmentation during
transitional period.--Section 208(b) of the Temporary
Extended Unemployment Compensation Act of 2002 (Public Law
107-147), as amended by Public Law 108-1 (117 Stat. 3) and
section 501(a), is amended--
(A) in paragraph (1)--
(i) by striking ``paragraphs (2) and (3)'' and inserting
``paragraph (2)''; and
(ii) by inserting before the period at the end the
following: ``, including such compensation payable by reason
of amounts deposited in such account after such date pursuant
to the application of subsection (c) of such section'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2).
(3) Extension of transition limitation.--Section 208(b)(2)
of the Temporary Extended Unemployment Compensation Act of
2002 (Public Law 107-147), as amended by Public Law 108-1
(117 Stat. 3) and section 501(a)(4) and as redesignated by
paragraph (2), is amended by striking ``February 28, 2004''
and inserting ``May 29, 2004''.
(4) Conforming amendment for augmented benefits.--Section
203(c)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by
striking ``the amount originally established in such account
(as determined under subsection (b)(1))'' and inserting ``7
times the individual's average weekly benefit amount for the
benefit year''.
(b) Effective Date and Application.--
(1) In general.--The amendments made by subsection (a)
shall apply with respect to weeks of unemployment beginning
on or after the date of enactment this Act.
(2) TEUC-X amounts deposited in account prior to date of
enactment deemed to be the additional teuc amounts provided
by this section.--In applying the amendments made by
subsection (a) under the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26),
the Secretary of Labor shall deem any amounts deposited into
an individual's temporary extended unemployment compensation
account by reason of section 203(c) of such Act (commonly
known as ``TEUC-X amounts'') prior to the date of enactment
of this Act to be amounts deposited in such account by reason
of section 203(b) of such Act, as amended by subsection (a)
(commonly known as ``TEUC amounts'').
(3) Application to exhaustees and current beneficiaries.--
(A) Exhaustees.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) who exhausted such individual's rights to such
compensation (by reason of the payment of all amounts in such
individual's temporary extended unemployment compensation
account) before such date,
such individual's eligibility for any additional weeks of
temporary extended unemployment compensation by reason of the
amendments made by subsection (a) shall apply with respect to
weeks of unemployment beginning on or after the date of
enactment of this Act.
(B) Current beneficiaries.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) as to whom the condition described in subparagraph
(A)(ii) does not apply,
such individual shall be eligible for temporary extended
unemployment compensation (in accordance with the provisions
of the Temporary Extended Unemployment Compensation Act of
2002, as amended by subsection (a)) with respect to weeks of
unemployment beginning on or after the date of enactment of
this Act.
(4) Redetermination of eligibility for augmented amounts
for individuals for whom such a determination was made prior
to the date of enactment.--Any determination of whether the
individual's State is in an extended benefit period under
section 203(c) of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28)
made prior to the date of enactment of this Act shall be
disregarded and the determination under such section shall be
made as follows:
(A) Individuals who exhausted all teuc and teuc-x amounts
prior to the date of enactment.--In the case of an individual
whose temporary extended unemployment account has, prior to
the date of enactment of this Act, been both augmented under
such section 203(c) and exhausted of all amounts by which it
was so augmented, the determination shall be made as of such
date of enactment.
(B) All other individuals.--In the case of an individual
who is not described in subparagraph (A), the determination
shall be made at the time that the individual's account
established under such section 203, as amended by subsection
(a), is exhausted.
(5) No effect on provisions related to displaced airline
related workers.--The amendments made by this section and
section 501 shall have no effect on the provisions of section
4002 of the Emergency Wartime Supplemental Appropriations
Act, 2003 (Public Law 108-11).
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
SEC. 511. FEDERAL-STATE AGREEMENTS.
(a) In General.--Any State which desires to do so may enter
into and participate in an agreement under this title with
the Secretary of Labor (in this title referred to as the
``Secretary''). Any State which is a party to an agreement
under this title may, upon providing 30 days' written notice
to the Secretary, terminate such agreement.
(b) Provisions of Agreement.--
(1) In general.--Subject to paragraph (3), any agreement
under subsection (a) shall provide that the State agency of
the State, in addition to any amounts of regular compensation
to which an individual may be entitled under the State law,
shall make payments of temporary enhanced regular
unemployment compensation to an individual in an amount and
to the extent that the individual would be entitled to
regular compensation if the State law were applied with the
modifications described in paragraph (2).
(2) Modifications described.--The modifications described
in this paragraph are as follows:
(A) In the case of an individual who is not eligible for
regular compensation under the State law because of the use
of a definition of base period that does not count wages
earned in the most recently completed calendar quarter, then
eligibility for compensation shall be determined by applying
a base period ending at the close of the most recently
completed calendar quarter.
(B) In the case of an individual who is not eligible for
regular compensation under the State law because such
individual does not meet requirements relating to
availability for work, active search for work, or refusal to
accept work, because such individual is seeking, or is
available for, less than full-time work, then compensation
shall not be denied by such State to an otherwise eligible
individual who seeks less than full-time work or fails to
accept full-time work.
(3) Reduction of amounts of regular compensation available
for individuals who sought part-time work or failed to accept
full-time work.--Any agreement under subsection (a) shall
provide that the State agency of the State shall reduce the
amount of regular compensation available to an individual who
has received temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in paragraph (2)(B) by the amount of
such temporary enhanced regular unemployment compensation.
(c) Coordination Rule.--The modifications described in
subsection (b)(2) shall also apply in determining the amount
of benefits payable under any Federal law to the extent that
those benefits are determined by reference to regular
compensation payable under the State law of the State
involved.
SEC. 512. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS
TITLE.
(a) General Rule.--There shall be paid to each State which
has entered into an agreement under this title an amount
equal to--
(1) 100 percent of any temporary enhanced regular
unemployment compensation; and
(2) 100 percent of any regular compensation which is paid
to individuals by such State by reason of the fact that its
State law contains provisions comparable to the modifications
described in subparagraphs (A) and (B) of section 511(b)(2),
but only to the extent that those amounts would, if such
amounts were instead payable by virtue of the State law's
being deemed to be so modified pursuant to section 511(b)(1),
have been reimbursable under paragraph (1).
(b) Determination of Amount.--Sums under subsection (a)
payable to any State by
[[Page S6367]]
reason of such State having an agreement under this title
shall be payable, either in advance or by way of
reimbursement (as may be determined by the Secretary), in
such amounts as the Secretary estimates the State will be
entitled to receive under this title for each calendar month,
reduced or increased, as the case may be, by any amount by
which the Secretary finds that the Secretary's estimates for
any prior calendar month were greater or less than the
amounts which should have been paid to the State. Such
estimates may be made on the basis of such statistical,
sampling, or other method as may be agreed upon by the
Secretary and the State agency of the State involved.
SEC. 513. FINANCING PROVISIONS.
(a) In General.--Funds in the extended unemployment
compensation account (as established by section 905(a) of the
Social Security Act (42 U.S.C. 1105(a))), and the Federal
unemployment account (as established by section 904(g) of
such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund
(as established by section 904(a) of such Act (42 U.S.C.
1104(a))) shall be used for the making of payments to States
having agreements entered into under this title.
(b) Certification.--The Secretary shall from time to time
certify to the Secretary of the Treasury for payment to each
State the sums which are payable to such State under this
title. The Secretary of the Treasury, prior to audit or
settlement by the General Accounting Office, shall make
payments to the State in accordance with such certification
by transfers from the extended unemployment compensation
account (as so established), or, to the extent that there are
insufficient funds in that account, from the Federal
unemployment account, to the account of such State in the
Unemployment Trust Fund (as so established).
(c) Assistance to States.--There are appropriated out of
the employment security administration account of the
Unemployment Trust Fund (as established by section 901(a) of
the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to
reimburse States for the costs of the administration of
agreements under this title (including any improvements in
technology in connection therewith) and to provide
reemployment services to unemployment compensation claimants
in States having agreements under this title. Each State's
share of the amount appropriated by the preceding sentence
shall be determined by the Secretary according to the factors
described in section 302(a) of the Social Security Act (42
U.S.C. 502(a)) and certified by the Secretary to the
Secretary of the Treasury.
(d) Appropriations for Certain Payments.--There are
appropriated from the general fund of the Treasury, without
fiscal year limitation, to the extended unemployment
compensation account (as so established) of the Unemployment
Trust Fund (as so established) such sums as the Secretary
estimates to be necessary to make the payments under this
section in respect of--
(1) compensation payable under chapter 85 of title 5,
United States Code; and
(2) compensation payable on the basis of services to which
section 3309(a)(1) of the Internal Revenue Code of 1986
applies.
Amounts appropriated pursuant to the preceding sentence shall
not be required to be repaid.
SEC. 514. DEFINITIONS.
For purposes of this title, the terms ``compensation'',
``base period'', ``regular compensation'', ``State'', ``State
agency'', ``State law'', and ``week'' have the respective
meanings given such terms under section 205 of the Federal-
State Extended Unemployment Compensation Act of 1970.
SEC. 515. APPLICABILITY.
(a) In General.--Except as provided in subsection (b), an
agreement entered into under this title shall apply to weeks
of unemployment--
(1) beginning after the date on which such agreement is
entered into; and
(2) ending before July 1, 2004.
(b) Phase-Out of TERUC.--
(1) In general.--Subject to paragraph (2), in the case of
an individual who has established eligibility for temporary
enhanced regular unemployment compensation, but who has not
exhausted all rights to such compensation, as of the last day
of the week ending before July 1, 2004, such compensation
shall continue to be payable to such individual for any week
beginning after such date for which the individual meets the
eligibility requirements of this title.
(2) Limitation.--No compensation shall be payable by reason
of paragraph (1) for any week beginning after December 31,
2004.
SEC. 516. COORDINATION WITH THE TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION ACT OF 2002.
(a) In General.--The Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended--
(1) in section 202(b)(1), by inserting ``, and who have
exhausted all rights to temporary enhanced regular
unemployment compensation'' before the semicolon at the end;
(2) in section 202(b)(2), by inserting ``, temporary
enhanced regular unemployment compensation,'' after ``regular
compensation'';
(3) in section 202(c), by inserting ``(or, as the case may
be, such individual's rights to temporary enhanced regular
unemployment compensation)'' after ``State law'' in the
matter preceding paragraph (1);
(4) in section 202(c)(1), by inserting ``and no payments of
temporary enhanced regular unemployment compensation can be
made'' after ``under such law'';
(5) in section 202(d)(1), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
(including dependents' allowances) payable to such individual
for such a week,'' after ``total unemployment'';
(6) in section 202(d)(2)(A), by inserting ``, or, as the
case may be, to temporary enhanced regular unemployment
compensation,'' after ``State law'';
(7) in section 203(b)(1)(A), by inserting ``plus the amount
of any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``under
such law''; and
(8) in section 203(b)(2), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``total
unemployment''.
(b) Amount of TEUC Offset by Amount of TERUC.--Section
203(b)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting a comma; and
(2) by adding at the end the following:
``minus the number of weeks in which the individual was
entitled to temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in section 511(b)(2)(A) of the Jobs
and Growth Reconciliation Tax Act of 2003 (relating to the
alternative base period) multiplied by the individual's
average weekly benefit amount for the benefit year.''.
(c) Temporary Enhanced Regular Unemployment Compensation
Defined.--Section 207 of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended to read as follows:
``SEC. 207. DEFINITIONS.
``In this title:
``(1) General definitions.--The terms `compensation',
`regular compensation', `extended compensation', `additional
compensation', `benefit year', `base period', `State', `State
agency', `State law', and `week' have the respective meanings
given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note).
``(2) Temporary enhanced regular unemployment
compensation.--The term `temporary enhanced regular
unemployment compensation' means temporary enhanced regular
unemployment benefits payable under title VI of the Jobs and
Growth Reconciliation Tax Act of 2003.''.
______
SA 616. Mr. DAYTON submitted an amendment intended to be proposed by
him to the bill S. 1054 to provide for reconciliation pursuant to
section 201 of the concurrent resolution on the budget for fiscal year
2004; which was ordered to lie on the table; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. PROHIBITION ON THE CONSIDERATION OF ANY LONG-TERM
PHASEIN OF ANY REVENUE-REDUCING MEASURE.
(a) In General.--Title III of the Congressional Budget and
Impoundment Control Act of 1974 is amended by adding at the
end the following:
``prohibition on the consideration of any long-term phasein of any
revenue-reducing measure
``Sec. 316. (a) In General.--It shall not be in order in
the House of Representatives or the Senate to consider any
bill, joint resolution, amendment, motion, or conference
report, that phases in a revenue-reducing measure for a
period longer than the 1-taxable year period beginning after
the date of the enactment of such measure.
``(b) Revenue-Reducing Measure.--The term `revenue-reducing
measure' means any change in any rate of tax, deduction,
exemption, credit, exclusion, or similar change to the
Internal Revenue Code of 1986 that will result in a reduction
in revenues to the United States Treasury.''.
(b) Supermajority Point of Order.--Subsections (c)(1) and
(d)(2) of section 904 of the Congressional Budget and
Impoundment Control Act of 1974 are amended by inserting
``316,'' after ``313,''.
(c) Conforming Amendment.--The table of contents for the
Congressional Budget and Impoundment Control Act of 1974 is
amended by inserting after the item relating to section 315
the following:
``Sec. 316. Prohibition on the consideration of any long-term phasein
of any revenue-reducing measure.''.
(d) Effective Date.--The amendments made by this section
take effect on January 1, 2004.
______
SA 617. Mr. GRAHAM of Florida proposed an amendment to the bill S.
1054, to provide for reconciliation pursuant to section 201 of the
concurrent resolution on the budget for fiscal year 2004; as follows:
Strike all after the enacting clause and insert the
following:
(a) Short Title.--This Act may be cited as the ``Family
Paycheck Tax Relief Economic Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in
[[Page S6368]]
this Act an amendment or repeal is expressed in terms of an
amendment to, or repeal of, a section or other provision, the
reference shall be considered to be made to a section or
other provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--
TITLE I--TAX RELIEF
Sec. 101. Refundable wage credit.
Sec. 102. Modifications to expensing under section 179.
TITLE II--STATE FISCAL RELIEF
Sec. 201. Temporary increase of medicaid FMAP.
TITLE III--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
Sec. 301. Extension of the Temporary Extended Unemployment Compensation
Act of 2002.
Sec. 302. Entitlement to additional weeks of temporary extended
unemployment compensation.
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
Sec. 311. Federal-State agreements.
Sec. 312. Payments to States having agreements under this title.
Sec. 313. Financing provisions.
Sec. 314. Definitions.
Sec. 315. Applicability.
Sec. 316. Coordination with the Temporary Extended Unemployment
Compensation Act of 2002.
TITLE IV--REVENUE PROVISIONS
Subtitle A--General Provisons
Sec. 401. Suspension of income tax rate reductions for highest income
taxpayers.
Sec. 402. Suspension of elimination of PEP and Pease phaseouts.
Sec. 403. Suspension of reductions in estate tax after 2006.
Sec. 404. Application of EGTRRA sunset to this subtitle.
Subtitle B--Provisions Designed To Curtail Tax Shelters
Sec. 411. Clarification of economic substance doctrine.
Sec. 412. Penalty for failing to disclose reportable transaction.
Sec. 413. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 414. Penalty for understatements attributable to transactions
lacking economic substance, etc.
Sec. 415. Modifications of substantial understatement penalty for
nonreportable transactions.
Sec. 416. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 417. Disclosure of reportable transactions.
Sec. 418. Modifications to penalty for failure to register tax
shelters.
Sec. 419. Modification of penalty for failure to maintain lists of
investors.
Sec. 420. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 421. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 422. Penalty on failure to report interests in foreign financial
accounts.
Sec. 423. Frivolous tax submissions.
Sec. 424. Penalty on promoters of tax shelters.
Sec. 425. Statute of limitations for taxable years for which listed
transactions not reported.
Sec. 426. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Subtitle C--Other Corporate Governance Provisions
Sec. 431. Affirmation of consolidated return regulation authority.
Sec. 432. Signing of corporate tax returns by chief executive officer.
Sec. 433. Securities civil enforcement provisions.
Subtitle D--Reversing the Expatriation of Profits Offshore
Sec. 440. Revision of tax rules on expatriation.
Sec. 441. Tax treatment of inverted corporate entities.
Sec. 442. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 443. Reinsurance of United States risks in foreign jurisdictions.
Subtitle E--Additional Provisions
Sec. 451. Treatment on nonqualified deferred compensation plans.
Sec. 452. Extension of customs user fees.
TITLE I--TAX RELIEF
SEC. 101. REFUNDABLE WAGE CREDIT.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 36 as
section 37 and by inserting after section 35 the following
new section:
``SEC. 36. WAGE CREDIT.
``(a) In General.--In the case of an individual, there
shall be allowed as a credit against the tax imposed by this
subtitle for the taxpayer's first taxable year beginning in
2003 or 2004 an amount equal to 7.65 percent of so much of
the taxpayer's wages (as defined in section 3401(a)) as does
not exceed $10,000.
``(b) Coordination with Advance Refunds of Credit.--
``(1) In general.--The amount of credit which would (but
for this paragraph) be allowable under subsection (a) shall
be reduced (but not below zero) by the aggregate adjustments
taken unto account under subsection (c). Any failure to so
reduce the credit shall be treated as arising out of a
mathematical or clerical error and assessed according to
section 6213(b)(1).
``(2) Joint returns.--In the case of an adjustment taken
into account under subsection (c) with respect to a joint
return, half of such credit shall be treated as having been
made or allowed to each individual filing such return.
``(c) Credit Paid Through Adjustment of Wage Withholding
Tables.--The Secretary shall adjust the wage withholding
tables prescribed under section 3402(a)(1), as soon as
practicable, to take into account the credit allowed under
under subsection (a).''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting before the period ``, or
from section 36 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of the Internal Revenue Code of
1986 is amended by striking the last item and inserting the
following new items:
``Sec. 36. Wage credit.
``Sec. 37. Overpayments of tax.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 102. MODIFICATIONS TO EXPENSING UNDER SECTION 179.
(a) Increase of Amount Which May Be Expensed.--
(1) In general.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000 ($100,000 in the case of section 179
property placed in service after June 30, 2003, and before
January 1, 2005).''
(2) Increase in phaseout threshold.--Paragraph (2) of
section 179(b) is amended by striking ``$200,000'' and
inserting ``$200,000 ($400,000 in the case of section 179
property placed in service after June 30, 2003, and before
January 1, 2005)''.
(b) Effective Date.--The amendments made by this section
shall apply to property placed in service after June 30,
2003.
TITLE II--STATE FISCAL RELIEF
SEC. 201. TEMPORARY INCREASE OF MEDICAID FMAP.
(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
section for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
First 2 Calendar Quarters of Fiscal Year 2004.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
section for a State for fiscal year 2004 is less than the
FMAP as so determined for fiscal year 2003, the FMAP for the
State for fiscal year 2003 shall be substituted for the
State's FMAP for the first and second calendar quarters of
fiscal year 2004, before the application of this section.
(c) General 15.1 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and First 2 Calendar
Quarters of Fiscal Year 2004.--Notwithstanding any other
provision of law, but subject to subsections (e) and (f), for
each State for the third and fourth calendar quarters of
fiscal year 2003 and the first and second calendar quarters
of fiscal year 2004, the FMAP (taking into account the
application of subsections (a) and (b)) shall be increased by
15.1 percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and the first and second
calendar quarters of fiscal year 2004, the amounts otherwise
determined for Puerto Rico, the Virgin Islands, Guam, the
Northern Mariana Islands, and American Samoa under
subsections (f) and (g) of section 1108 of the Social
Security Act (42 U.S.C. 1308) shall each be increased by an
amount equal to 30.2 percent of such amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4); or
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.).
[[Page S6369]]
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, but prior to the date of
enactment of this Act is eligible for an increase in its FMAP
under subsection (c) or an increase in a cap amount under
subsection (d) in the first calendar quarter (and subsequent
calendar quarters) in which the State has reinstated
eligibility that is no more restrictive than the eligibility
under such plan (or waiver) as in effect on September 2,
2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as defined in section 1905(b) of the
Social Security Act (42 U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of April 1, 2004, this section is
repealed.
TITLE III--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
SEC. 301. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT
COMPENSATION ACT OF 2002.
(a) In General.--Section 208 of the Temporary Extended
Unemployment Compensation Act of 2002 (Public Law 107-147;
116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3),
is amended--
(1) in subsection (a)(2), by striking ``before June 1'' and
inserting ``on or before November 30'';
(2) in subsection (b)(1), by striking ``May 31, 2003'' and
inserting ``November 30, 2003'';
(3) in subsection (b)(2)--
(A) in the heading, by striking ``may 31, 2003'' and
inserting ``november 30, 2003''; and
(B) by striking ``May 31, 2003'' and inserting ``November
30, 2003''; and
(4) in subsection (b)(3), by striking ``August 30, 2003''
and inserting ``February 28, 2004''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 21).
SEC. 302. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY
EXTENDED UNEMPLOYMENT COMPENSATION.
(a) Entitlement to Additional Weeks.--
(1) In general.--Paragraph (1) of section 203(b) of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 28) is amended--
(A) in subparagraph (A), by striking ``50 percent'' and
inserting ``100 percent''; and
(B) in subparagraph (B), by striking ``13 times'' and
inserting ``26 times''.
(2) Repeal of restriction on augmentation during
transitional period.--Section 208(b) of the Temporary
Extended Unemployment Compensation Act of 2002 (Public Law
107-147), as amended by Public Law 108-1 (117 Stat. 3) and
section 301(a), is amended--
(A) in paragraph (1)--
(i) by striking ``paragraphs (2) and (3)'' and inserting
``paragraph (2)''; and
(ii) by inserting before the period at the end the
following: ``, including such compensation payable by reason
of amounts deposited in such account after such date pursuant
to the application of subsection (c) of such section'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2).
(3) Extension of transition limitation.--Section 208(b)(2)
of the Temporary Extended Unemployment Compensation Act of
2002 (Public Law 107-147), as amended by Public Law 108-1
(117 Stat. 3) and section 301(a)(4) and as redesignated by
paragraph (2), is amended by striking ``February 28, 2004''
and inserting ``May 29, 2004''.
(4) Conforming amendment for augmented benefits.--Section
203(c)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by
striking ``the amount originally established in such account
(as determined under subsection (b)(1))'' and inserting ``7
times the individual's average weekly benefit amount for the
benefit year''.
(b) Effective Date and Application.--
(1) In general.--The amendments made by subsection (a)
shall apply with respect to weeks of unemployment beginning
on or after the date of enactment this Act.
(2) TEUC-X amounts deposited in account prior to date of
enactment deemed to be the additional teuc amounts provided
by this section.--In applying the amendments made by
subsection (a) under the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26),
the Secretary of Labor shall deem any amounts deposited into
an individual's temporary extended unemployment compensation
account by reason of section 203(c) of such Act (commonly
known as ``TEUC-X amounts'') prior to the date of enactment
of this Act to be amounts deposited in such account by reason
of section 203(b) of such Act, as amended by subsection (a)
(commonly known as ``TEUC amounts'').
(3) Application to exhaustees and current beneficiaries.--
(A) Exhaustees.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) who exhausted such individual's rights to such
compensation (by reason of the payment of all amounts in such
individual's temporary extended unemployment compensation
account) before such date,
such individual's eligibility for any additional weeks of
temporary extended unemployment compensation by reason of the
amendments made by subsection (a) shall apply with respect to
weeks of unemployment beginning on or after the date of
enactment of this Act.
(B) Current beneficiaries.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) as to whom the condition described in subparagraph
(A)(ii) does not apply,
such individual shall be eligible for temporary extended
unemployment compensation (in accordance with the provisions
of the Temporary Extended Unemployment Compensation Act of
2002, as amended by subsection (a)) with respect to weeks of
unemployment beginning on or after the date of enactment of
this Act.
(4) Redetermination of eligibility for augmented amounts
for individuals for whom such a determination was made prior
to the date of enactment.--Any determination of whether the
individual's State is in an extended benefit period under
section 203(c) of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28)
made prior to the date of enactment of this Act shall be
disregarded and the determination under such section shall be
made as follows:
(A) Individuals who exhausted all teuc and teuc-x amounts
prior to the date of enactment.--In the case of an individual
whose temporary extended unemployment account has, prior to
the date of enactment of this Act, been both augmented under
such section 203(c) and exhausted of all amounts by which it
was so augmented, the determination shall be made as of such
date of enactment.
(B) All other individuals.--In the case of an individual
who is not described in subparagraph (A), the determination
shall be made at the time that the individual's account
established under such section 203, as amended by subsection
(a), is exhausted.
(5) No effect on provisions related to displaced airline
related workers.--The amendments made by this section and
section 301 shall have no effect on the provisions of section
4002 of the Emergency Wartime Supplemental Appropriations
Act, 2003 (Public Law 108-11).
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
SEC. 311. FEDERAL-STATE AGREEMENTS.
(a) In General.--Any State which desires to do so may enter
into and participate in an agreement under this title with
the Secretary of Labor (in this title referred to as the
``Secretary''). Any State which is a party to an agreement
under this title may, upon providing 30 days' written notice
to the Secretary, terminate such agreement.
(b) Provisions of Agreement.--
(1) In general.--Subject to paragraph (3), any agreement
under subsection (a) shall provide that the State agency of
the State, in addition to any amounts of regular compensation
to which an individual may be entitled under the State law,
shall make payments of temporary enhanced regular
unemployment compensation to an individual in an amount and
to the extent that the individual would be entitled to
regular compensation if the State law were applied with the
modifications described in paragraph (2).
(2) Modifications described.--The modifications described
in this paragraph are as follows:
(A) In the case of an individual who is not eligible for
regular compensation under the State law because of the use
of a definition of base period that does not count wages
earned in the most recently completed calendar quarter, then
eligibility for compensation shall be determined by applying
a base period ending at the close of the most recently
completed calendar quarter.
(B) In the case of an individual who is not eligible for
regular compensation under the State law because such
individual does not meet requirements relating to
availability for work, active search for work, or refusal to
accept work, because such individual is seeking, or is
available for, less than full-time work, then compensation
shall not be denied by such State to an otherwise eligible
individual who seeks less than full-time work or fails to
accept full-time work.
[[Page S6370]]
(3) Reduction of amounts of regular compensation available
for individuals who sought part-time work or failed to accept
full-time work.--Any agreement under subsection (a) shall
provide that the State agency of the State shall reduce the
amount of regular compensation available to an individual who
has received temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in paragraph (2)(B) by the amount of
such temporary enhanced regular unemployment compensation.
(c) Coordination Rule.--The modifications described in
subsection (b)(2) shall also apply in determining the amount
of benefits payable under any Federal law to the extent that
those benefits are determined by reference to regular
compensation payable under the State law of the State
involved.
SEC. 312. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS
TITLE.
(a) General Rule.--There shall be paid to each State which
has entered into an agreement under this title an amount
equal to--
(1) 100 percent of any temporary enhanced regular
unemployment compensation; and
(2) 100 percent of any regular compensation which is paid
to individuals by such State by reason of the fact that its
State law contains provisions comparable to the modifications
described in subparagraphs (A) and (B) of section 311(b)(2),
but only to the extent that those amounts would, if such
amounts were instead payable by virtue of the State law's
being deemed to be so modified pursuant to section 311(b)(1),
have been reimbursable under paragraph (1).
(b) Determination of Amount.--Sums under subsection (a)
payable to any State by reason of such State having an
agreement under this title shall be payable, either in
advance or by way of reimbursement (as may be determined by
the Secretary), in such amounts as the Secretary estimates
the State will be entitled to receive under this title for
each calendar month, reduced or increased, as the case may
be, by any amount by which the Secretary finds that the
Secretary's estimates for any prior calendar month were
greater or less than the amounts which should have been paid
to the State. Such estimates may be made on the basis of such
statistical, sampling, or other method as may be agreed upon
by the Secretary and the State agency of the State involved.
SEC. 313. FINANCING PROVISIONS.
(a) In General.--Funds in the extended unemployment
compensation account (as established by section 905(a) of the
Social Security Act (42 U.S.C. 1105(a))), and the Federal
unemployment account (as established by section 904(g) of
such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund
(as established by section 904(a) of such Act (42 U.S.C.
1104(a))) shall be used for the making of payments to States
having agreements entered into under this title.
(b) Certification.--The Secretary shall from time to time
certify to the Secretary of the Treasury for payment to each
State the sums which are payable to such State under this
title. The Secretary of the Treasury, prior to audit or
settlement by the General Accounting Office, shall make
payments to the State in accordance with such certification
by transfers from the extended unemployment compensation
account (as so established), or, to the extent that there are
insufficient funds in that account, from the Federal
unemployment account, to the account of such State in the
Unemployment Trust Fund (as so established).
(c) Assistance to States.--There are appropriated out of
the employment security administration account of the
Unemployment Trust Fund (as established by section 901(a) of
the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to
reimburse States for the costs of the administration of
agreements under this title (including any improvements in
technology in connection therewith) and to provide
reemployment services to unemployment compensation claimants
in States having agreements under this title. Each State's
share of the amount appropriated by the preceding sentence
shall be determined by the Secretary according to the factors
described in section 302(a) of the Social Security Act (42
U.S.C. 502(a)) and certified by the Secretary to the
Secretary of the Treasury.
(d) Appropriations for Certain Payments.--There are
appropriated from the general fund of the Treasury, without
fiscal year limitation, to the extended unemployment
compensation account (as so established) of the Unemployment
Trust Fund (as so established) such sums as the Secretary
estimates to be necessary to make the payments under this
section in respect of--
(1) compensation payable under chapter 85 of title 5,
United States Code; and
(2) compensation payable on the basis of services to which
section 3309(a)(1) of the Internal Revenue Code of 1986
applies.
Amounts appropriated pursuant to the preceding sentence shall
not be required to be repaid.
SEC. 314. DEFINITIONS.
For purposes of this title, the terms ``compensation'',
``base period'', ``regular compensation'', ``State'', ``State
agency'', ``State law'', and ``week'' have the respective
meanings given such terms under section 205 of the Federal-
State Extended Unemployment Compensation Act of 1970.
SEC. 315. APPLICABILITY.
(a) In General.--Except as provided in subsection (b), an
agreement entered into under this title shall apply to weeks
of unemployment--
(1) beginning after the date on which such agreement is
entered into; and
(2) ending before July 1, 2004.
(b) Phase-Out of TERUC.--
(1) In general.--Subject to paragraph (2), in the case of
an individual who has established eligibility for temporary
enhanced regular unemployment compensation, but who has not
exhausted all rights to such compensation, as of the last day
of the week ending before July 1, 2004, such compensation
shall continue to be payable to such individual for any week
beginning after such date for which the individual meets the
eligibility requirements of this title.
(2) Limitation.--No compensation shall be payable by reason
of paragraph (1) for any week beginning after December 31,
2004.
SEC. 316. COORDINATION WITH THE TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION ACT OF 2002.
(a) In General.--The Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended--
(1) in section 202(b)(1), by inserting ``, and who have
exhausted all rights to temporary enhanced regular
unemployment compensation'' before the semicolon at the end;
(2) in section 202(b)(2), by inserting ``, temporary
enhanced regular unemployment compensation,'' after ``regular
compensation'';
(3) in section 202(c), by inserting ``(or, as the case may
be, such individual's rights to temporary enhanced regular
unemployment compensation)'' after ``State law'' in the
matter preceding paragraph (1);
(4) in section 202(c)(1), by inserting ``and no payments of
temporary enhanced regular unemployment compensation can be
made'' after ``under such law'';
(5) in section 202(d)(1), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
(including dependents' allowances) payable to such individual
for such a week,'' after ``total unemployment'';
(6) in section 202(d)(2)(A), by inserting ``, or, as the
case may be, to temporary enhanced regular unemployment
compensation,'' after ``State law'';
(7) in section 203(b)(1)(A), by inserting ``plus the amount
of any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``under
such law''; and
(8) in section 203(b)(2), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``total
unemployment''.
(b) Amount of TEUC Offset by Amount of TERUC.--Section
203(b)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting a comma; and
(2) by adding at the end the following:
``minus the number of weeks in which the individual was
entitled to temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in section 311(b)(2)(A) of the Family
Paycheck Tax Relief Act of 2003 (relating to the alternative
base period) multiplied by the individual's average weekly
benefit amount for the benefit year.''.
(c) Temporary Enhanced Regular Unemployment Compensation
Defined.--Section 207 of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended to read as follows:
``SEC. 207. DEFINITIONS.
``In this title:
``(1) General definitions.--The terms `compensation',
`regular compensation', `extended compensation', `additional
compensation', `benefit year', `base period', `State', `State
agency', `State law', and `week' have the respective meanings
given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note).
``(2) Temporary enhanced regular unemployment
compensation.--The term `temporary enhanced regular
unemployment compensation' means temporary enhanced regular
unemployment benefits payable under title III of the Family
Paycheck Tax Relief Act of 2003.''.
TITLE IV--REVENUE PROVISIONS
Subtitle A--General Provisons
SEC. 401. SUSPENSION OF INCOME TAX RATE REDUCTIONS FOR
HIGHEST INCOME TAXPAYERS.
(a) In General.--The table contained in section 1(i)(2) of
the Internal Revenue Code of 1986 (relating to reductions in
rates after June 30, 2001) is amended--
(1) in the second column, by striking ``29.0%'' and
inserting ``30.0%'',
(2) in the second column, by striking ``28.9%'' and
inserting ``30.0%'',
(3) in the third column, by striking ``34.0%'' and
inserting ``35.0%'',
(4) in the third column, by striking ``33.0%'' and
inserting ``35.0%'',
(5) in the last column, by striking ``37.6%'' and inserting
``38.6%'', and
(6) in the last column, by striking ``35.0%'' and inserting
``38.6%''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
[[Page S6371]]
SEC. 402. SUSPENSION OF ELIMINATION OF PEP AND PEASE
PHASEOUTS.
(a) PEP.--Section 151(d)(3) (relating to phaseout) is
amended by striking subparagraphs (E) and (F).
(b) Pease.--Section 68 (relating to overall limitation on
itemized deductions) is amended by striking subsections (f)
and (g).
SEC. 403. SUSPENSION OF REDUCTIONS IN ESTATE TAX AFTER 2006.
(a) Elimination of Estate Tax Repeal.--Subtitle A of title
V, sections 511(d), 511(e), and 521(b)(2), and subtitle E of
title V of the Economic Growth and Tax Relief Reconciliation
Act of 2001 are repealed.
(b) Conforming Amendments.--The table contained in section
2001(c)(2)(B) of the Internal Revenue Code of 1986 is
amended--
(1) by striking the item relating to 2007, 2008, and 2009,
and
(2) by striking ``2006'' and inserting ``2006, 2007, 2008,
and 2009''.
(c) Effective Date.--The amendments made by this section
shall apply to the estates of decedents dying, and gifts
made, after December 31, 2006.
SEC. 404. APPLICATION OF EGTRRA SUNSET TO THIS SUBTITLE.
Each amendment made by this subtitle shall be subject to
title IX of the Economic Growth and Tax Relief Reconciliation
Act of 2001 to the same extent and in the same manner as the
provision of such Act to which such amendment relates.
Subtitle B--Provisions Designed To Curtail Tax Shelters
SEC. 411. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701, as amended by this Act, is
amended by redesignating subsection (o) as subsection (p) and
by inserting after subsection (n) the following new
subsection:
``(o) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects and, if there is any Federal tax
effects, also apart from any foreign, State, or local tax
effects) the taxpayer's economic position, and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(D) Treatment of lessors.--In applying subclause (I) of
paragraph (1)(B)(ii) to the lessor of tangible property
subject to a lease, the expected net tax benefits shall not
include the benefits of depreciation, or any tax credit, with
respect to the leased property and subclause (II) of
paragraph (1)(B)(ii) shall be disregarded in determining
whether any of such benefits are allowable.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into after February 15,
2004.
SEC. 412. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--The term `high net worth
individual' means, with respect to a transaction, a natural
person whose net worth exceeds $2,000,000 immediately before
the transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall
[[Page S6372]]
place in the file in the Office of the Commissioner the
opinion of the Commissioner or the head of the Office of Tax
Shelter Analysis with respect to the determination,
including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 413. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable transaction
understatements and noneconomic substance transaction
understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
[[Page S6373]]
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 414. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A applies.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(o)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(o)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into after February 15,
2004.
SEC. 415. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY
FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 416. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 417. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
[[Page S6374]]
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 418. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the reportable transaction before the date
the return including the transaction is filed under section
6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 419. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's request, such person shall pay a
penalty of $10,000 for each day of such failure after such
20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 420. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority To Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct' means any action, or failure to take
action, subject to penalty under section 6700, 6701, 6707, or
6708.''
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS.''
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 421. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 422. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
[[Page S6375]]
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 423. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-in-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, Etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 424. PENALTY ON PROMOTERS OF TAX SHELTERS.
(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 425. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(e)(1) (relating to
substantial omission of items for income taxes) is amended by
adding at the end the following new subparagraph:
``(C) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the tax for
such taxable year may be assessed, or a proceeding in court
for collection of such tax may be begun without assessment,
at any time within 6 years after the time the return is
filed. This subparagraph shall not apply to any taxable year
if the time for assessment or beginning the proceeding in
court has expired before the time a transaction is treated as
a listed transaction under section 6011.''
(b) Effective Date.--The amendment made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 426. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable To Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''
[[Page S6376]]
(b) Effective Date.--The amendments made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
Subtitle C--Other Corporate Governance Provisions
SEC. 431. AFFIRMATION OF CONSOLIDATED RETURN REGULATION
AUTHORITY.
(a) In General.--Section 1502 (relating to consolidated
return regulations) is amended by adding at the end the
following new sentence: ``In prescribing such regulations,
the Secretary may prescribe rules applicable to corporations
filing consolidated returns under section 1501 that are
different from other provisions of this title that would
apply if such corporations filed separate returns.''
(b) Result Not Overturned.--Notwithstanding subsection (a),
the Internal Revenue Code of 1986 shall be construed by
treating Treasury regulation Sec. 1.1502-20(c)(1)(iii) (as in
effect on January 1, 2001) as being inapplicable to the type
of factual situation in 255 F.3d 1357 (Fed. Cir. 2001).
(c) Effective Date.--The provisions of this section shall
apply to taxable years beginning before, on, or after the
date of the enactment of this Act.
SEC. 432. SIGNING OF CORPORATE TAX RETURNS BY CHIEF EXECUTIVE
OFFICER.
(a) In General.--Section 6062 (relating to signing of
corporation returns) is amended by striking the first
sentence and inserting the following new sentence: ``The
return of a corporation with respect to income shall be
signed by the chief executive officer of such corporation (or
other such officer of the corporation as the Secretary may
designate if the corporation does not have a chief executive
officer). The preceding sentence shall not apply to any
return of a regulated investment company (within the meaning
of section 851).''.
(b) Effective Date.--The amendment made by this section
shall apply to returns filed after the date of the enactment
of this Act.
SEC. 433. SECURITIES CIVIL ENFORCEMENT PROVISIONS.
(a) Authority To Assess Civil Money Penalties.--
(1) Securities act of 1933.--Section 8A of the Securities
Act of 1933 (15 U.S.C. 77h-1) is amended by adding at the end
the following new subsection:
``(g) Authority of the Commission To Assess Money
Penalty.--
``(1) In general.--In any cease-and-desist proceeding under
subsection (a), the Commission may impose a civil monetary
penalty if it finds, on the record after notice and
opportunity for hearing, that a person is violating, has
violated, or is or was a cause of the violation of, any
provision of this title or any rule or regulation thereunder,
and that such penalty is in the public interest.
``(2) Maximum amount of penalty.--
``(A) First tier.--The maximum amount of penalty for each
act or omission described in paragraph (1) shall be $100,000
for a natural person or $250,000 for any other person.
``(B) Second tier.--Notwithstanding subparagraph (A), the
maximum amount of penalty for such act or omission described
in paragraph (1) shall be $500,000 for a natural person or
$1,000,000 for any other person, if the act or omission
involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a statutory or regulatory requirement.
``(C) Third tier.--Notwithstanding subparagraphs (A) and
(B), the maximum amount of penalty for each act or omission
described in paragraph (1) shall be $1,000,000 for a natural
person or $2,000,000 for any other person, if--
``(i) the act or omission involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a
statutory or regulatory requirement; and
``(ii) such act or omission directly or indirectly resulted
in substantial losses or created a significant risk of
substantial losses to other persons or resulted in
substantial pecuniary gain to the person who committed the
act or omission.
``(3) Evidence concerning ability to pay.--In any
proceeding in which the Commission or the appropriate
regulatory agency may impose a penalty under this section, a
respondent may present evidence of the ability of the
respondent to pay such penalty. The Commission or the
appropriate regulatory agency may, in its discretion,
consider such evidence in determining whether the penalty is
in the public interest. Such evidence may relate to the
extent of the person's ability to continue in business and
the collectability of a penalty, taking into account any
other claims of the United States or third parties upon the
assets of that person and the amount of the assets of that
person.''.
(2) Securities exchange act of 1934.--Section 21B(a) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-2(a)) is
amended--
(A) in paragraph (4), by striking ``supervision;'' and all
that follows through the end of the subsection and inserting
``supervision.'';
(B) by redesignating paragraphs (1) through (4) as
subparagraphs (A) through (D), respectively, and moving the
margins 2 ems to the right;
(C) by inserting ``that such penalty is in the public
interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting the
following:
``(1) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(2) Other money penalties.--In any proceeding under
section 21C against any person, the Commission may impose a
civil monetary penalty if it finds, on the record after
notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the
violation of, any provision of this title or any rule or
regulation thereunder, and that such penalty is in the public
interest.''.
(3) Investment company act of 1940.--Section 9(d)(1) of the
Investment Company Act of 1940 (15 U.S.C. 80a-9(d)(1)) is
amended--
(A) in subparagraph (C), by striking ``therein;'' and all
that follows through the end of the paragraph and inserting
``supervision.'';
(B) by redesignating subparagraphs (A) through (C) as
clauses (i) through (iii), respectively, and moving the
margins 2 ems to the right;
(C) by inserting ``that such penalty is in the public
interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting the
following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Other money penalties.--In any proceeding under
subsection (f) against any person, the Commission may impose
a civil monetary penalty if it finds, on the record after
notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the
violation of, any provision of this title or any rule or
regulation thereunder, and that such penalty is in the public
interest.''.
(4) Investment advisers act of 1940.--Section 203(i)(1) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b-3(i)(1))
is amended--
(A) in subparagraph (D), by striking ``supervision;'' and
all that follows through the end of the paragraph and
inserting ``supervision.'';
(B) by redesignating subparagraphs (A) through (D) as
clauses (i) through (iv), respectively, and moving the
margins 2 ems to the right;
(C) by inserting ``that such penalty is in the public
interest and'' after ``hearing,'';
(D) by striking ``In any proceeding'' and inserting the
following:
``(A) In general.--In any proceeding''; and
(E) by adding at the end the following:
``(B) Other money penalties.--In any proceeding under
subsection (k) against any person, the Commission may impose
a civil monetary penalty if it finds, on the record after
notice and opportunity for hearing, that such person is
violating, has violated, or is or was a cause of the
violation of, any provision of this title or any rule or
regulation thereunder, and that such penalty is in the public
interest.''.
(b) Increased Maximum Civil Money Penalties.--
(1) Securities act of 1933.--Section 20(d)(2) of the
Securities Act of 1933 (15 U.S.C. 77t(d)(2)) is amended--
(A) in subparagraph (A)(i)--
(i) by striking ``$5,000'' and inserting ``$100,000''; and
(ii) by striking ``$50,000'' and inserting ``$250,000'';
(B) in subparagraph (B)(i)--
(i) by striking ``$50,000'' and inserting ``$500,000''; and
(ii) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(C) in subparagraph (C)(i)--
(i) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(ii) by striking ``$500,000'' and inserting ``$2,000,000''.
(2) Securities exchange act of 1934.--
(A) Penalties.--Section 32 of the Securities Exchange Act
of 1934 (15 U.S.C. 78ff) is amended--
(i) in subsection (b), by striking ``$100'' and inserting
``$10,000''; and
(ii) in subsection (c)--
(I) in paragraph (1)(B), by striking ``$10,000'' and
inserting ``$500,000''; and
(II) in paragraph (2)(B), by striking ``$10,000'' and
inserting ``$500,000''.
(B) Insider trading.--Section 21A(a)(3) of the Securities
Exchange Act of 1934 (15 U.S.C. 78u-1(a)(3)) is amended by
striking ``$1,000,000'' and inserting ``$2,000,000''.
(C) Administrative proceedings.--Section 21B(b) of the
Securities Exchange Act of 1934 (15 U.S.C. 78u-2(b)) is
amended--
(i) in paragraph (1)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in paragraph (2)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in paragraph (3)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(D) Civil actions.--Section 21(d)(3)(B) of the Securities
Exchange Act of 1934 (15 U.S.C. 78u(d)(3)(B)) is amended--
(i) in clause (i)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in clause (ii)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in clause (iii)--
[[Page S6377]]
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(3) Investment company act of 1940.--
(A) Ineligibility.--Section 9(d)(2) of the Investment
Company Act of 1940 (15 U.S.C. 80a-9(d)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(B) Enforcement of investment company act.--Section
42(e)(2) of the Investment Company Act of 1940 (15 U.S.C.
80a-41(e)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(4) Investment advisers act of 1940.--
(A) Registration.--Section 203(i)(2) of the Investment
advisers Act of 1940 (15 U.S.C. 80b-3(i)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(B) Enforcement of investment advisers act.--Section
209(e)(2) of the Investment advisers Act of 1940 (15 U.S.C.
80b-9(e)(2)) is amended--
(i) in subparagraph (A)--
(I) by striking ``$5,000'' and inserting ``$100,000''; and
(II) by striking ``$50,000'' and inserting ``$250,000'';
(ii) in subparagraph (B)--
(I) by striking ``$50,000'' and inserting ``$500,000''; and
(II) by striking ``$250,000'' and inserting ``$1,000,000'';
and
(iii) in subparagraph (C)--
(I) by striking ``$100,000'' and inserting ``$1,000,000'';
and
(II) by striking ``$500,000'' and inserting ``$2,000,000''.
(c) Authority To Obtain Financial Records.--Section 21(h)
of the Securities Exchange Act of 1934 (15 U.S.C. 78u(h)) is
amended--
(1) by striking paragraphs (2) through (8);
(2) in paragraph (9), by striking ``(9)(A)'' and all that
follows through ``(B) The'' and inserting ``(3) The'';
(3) by inserting after paragraph (1), the following:
``(2) Access to financial records.--
``(A) In general.--Notwithstanding section 1105 or 1107 of
the Right to Financial Privacy Act of 1978, the Commission
may obtain access to and copies of, or the information
contained in, financial records of any person held by a
financial institution, including the financial records of a
customer, without notice to that person, when it acts
pursuant to a subpoena authorized by a formal order of
investigation of the Commission and issued under the
securities laws or pursuant to an administrative or judicial
subpoena issued in a proceeding or action to enforce the
securities laws.
``(B) Nondisclosure of requests.--If the Commission so
directs in its subpoena, no financial institution, or
officer, director, partner, employee, shareholder,
representative or agent of such financial institution, shall,
directly or indirectly, disclose that records have been
requested or provided in accordance with subparagraph (A), if
the Commission finds reason to believe that such disclosure
may--
``(i) result in the transfer of assets or records outside
the territorial limits of the United States;
``(ii) result in improper conversion of investor assets;
``(iii) impede the ability of the Commission to identify,
trace, or freeze funds involved in any securities
transaction;
``(iv) endanger the life or physical safety of an
individual;
``(v) result in flight from prosecution;
``(vi) result in destruction of or tampering with evidence;
``(vii) result in intimidation of potential witnesses; or
``(viii) otherwise seriously jeopardize an investigation or
unduly delay a trial.
``(C) Transfer of records to government authorities.--The
Commission may transfer financial records or the information
contained therein to any government authority, if the
Commission proceeds as a transferring agency in accordance
with section 1112 of the Right to Financial Privacy Act of
1978 (12 U.S.C. 3412), except that a customer notice shall
not be required under subsection (b) or (c) of that section
1112, if the Commission determines that there is reason to
believe that such notification may result in or lead to any
of the factors identified under clauses (i) through (viii) of
subparagraph (B) of this paragraph.'';
(4) by striking paragraph (10); and
(5) by redesignating paragraphs (11), (12), and (13) as
paragraphs (4), (5), and (6), respectively.
Subtitle D--Reversing the Expatriation of Profits Offshore
SEC. 440. REVISION OF TAX RULES ON EXPATRIATION.
(a) In General.--Subpart A of part II of subchapter N of
chapter 1 is amended by inserting after section 877 the
following new section:
``SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION.
``(a) General Rules.--For purposes of this subtitle--
``(1) Mark to market.--Except as provided in subsections
(d) and (f), all property of a covered expatriate to whom
this section applies shall be treated as sold on the day
before the expatriation date for its fair market value.
``(2) Recognition of gain or loss.--In the case of any sale
under paragraph (1)--
``(A) notwithstanding any other provision of this title,
any gain arising from such sale shall be taken into account
for the taxable year of the sale, and
``(B) any loss arising from such sale shall be taken into
account for the taxable year of the sale to the extent
otherwise provided by this title, except that section 1091
shall not apply to any such loss.
Proper adjustment shall be made in the amount of any gain or
loss subsequently realized for gain or loss taken into
account under the preceding sentence.
``(3) Exclusion for certain gain.--
``(A) In general.--The amount which, but for this
paragraph, would be includible in the gross income of any
individual by reason of this section shall be reduced (but
not below zero) by $600,000. For purposes of this paragraph,
allocable expatriation gain taken into account under
subsection (f)(2) shall be treated in the same manner as an
amount required to be includible in gross income.
``(B) Cost-of-living adjustment.--
``(i) In general.--In the case of an expatriation date
occurring in any calendar year after 2003, the $600,000
amount under subparagraph (A) shall be increased by an amount
equal to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f)(3) for such calendar year, determined by
substituting `calendar year 2002' for `calendar year 1992' in
subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount after adjustment
under clause (i) is not a multiple of $1,000, such amount
shall be rounded to the next lower multiple of $1,000.
``(4) Election to continue to be taxed as united states
citizen.--
``(A) In general.--If a covered expatriate elects the
application of this paragraph--
``(i) this section (other than this paragraph and
subsection (i)) shall not apply to the expatriate, but
``(ii) in the case of property to which this section would
apply but for such election, the expatriate shall be subject
to tax under this title in the same manner as if the
individual were a United States citizen.
``(B) Requirements.--Subparagraph (A) shall not apply to an
individual unless the individual--
``(i) provides security for payment of tax in such form and
manner, and in such amount, as the Secretary may require,
``(ii) consents to the waiver of any right of the
individual under any treaty of the United States which would
preclude assessment or collection of any tax which may be
imposed by reason of this paragraph, and
``(iii) complies with such other requirements as the
Secretary may prescribe.
``(C) Election.--An election under subparagraph (A) shall
apply to all property to which this section would apply but
for the election and, once made, shall be irrevocable. Such
election shall also apply to property the basis of which is
determined in whole or in part by reference to the property
with respect to which the election was made.
``(b) Election To Defer Tax.--
``(1) In general.--If the taxpayer elects the application
of this subsection with respect to any property treated as
sold by reason of subsection (a), the payment of the
additional tax attributable to such property shall be
postponed until the due date of the return for the taxable
year in which such property is disposed of (or, in the case
of property disposed of in a transaction in which gain is not
recognized in whole or in part, until such other date as the
Secretary may prescribe).
``(2) Determination of tax with respect to property.--For
purposes of paragraph (1), the additional tax attributable to
any property is an amount which bears the same ratio to the
additional tax imposed by this chapter for the taxable year
solely by reason of subsection (a) as the gain taken into
account under subsection (a) with respect to
[[Page S6378]]
such property bears to the total gain taken into account
under subsection (a) with respect to all property to which
subsection (a) applies.
``(3) Termination of postponement.--No tax may be postponed
under this subsection later than the due date for the return
of tax imposed by this chapter for the taxable year which
includes the date of death of the expatriate (or, if earlier,
the time that the security provided with respect to the
property fails to meet the requirements of paragraph (4),
unless the taxpayer corrects such failure within the time
specified by the Secretary).
``(4) Security.--
``(A) In general.--No election may be made under paragraph
(1) with respect to any property unless adequate security is
provided to the Secretary with respect to such property.
``(B) Adequate security.--For purposes of subparagraph (A),
security with respect to any property shall be treated as
adequate security if--
``(i) it is a bond in an amount equal to the deferred tax
amount under paragraph (2) for the property, or
``(ii) the taxpayer otherwise establishes to the
satisfaction of the Secretary that the security is adequate.
``(5) Waiver of certain rights.--No election may be made
under paragraph (1) unless the taxpayer consents to the
waiver of any right under any treaty of the United States
which would preclude assessment or collection of any tax
imposed by reason of this section.
``(6) Elections.--An election under paragraph (1) shall
only apply to property described in the election and, once
made, is irrevocable. An election may be made under paragraph
(1) with respect to an interest in a trust with respect to
which gain is required to be recognized under subsection
(f)(1).
``(7) Interest.--For purposes of section 6601--
``(A) the last date for the payment of tax shall be
determined without regard to the election under this
subsection, and
``(B) section 6621(a)(2) shall be applied by substituting
`5 percentage points' for `3 percentage points' in
subparagraph (B) thereof.
``(c) Covered Expatriate.--For purposes of this section--
``(1) In general.--Except as provided in paragraph (2), the
term `covered expatriate' means an expatriate.
``(2) Exceptions.--An individual shall not be treated as a
covered expatriate if--
``(A) the individual--
``(i) became at birth a citizen of the United States and a
citizen of another country and, as of the expatriation date,
continues to be a citizen of, and is taxed as a resident of,
such other country, and
``(ii) has not been a resident of the United States (as
defined in section 7701(b)(1)(A)(ii)) during the 5 taxable
years ending with the taxable year during which the
expatriation date occurs, or
``(B)(i) the individual's relinquishment of United States
citizenship occurs before such individual attains age 18\1/
2\, and
``(ii) the individual has been a resident of the United
States (as so defined) for not more than 5 taxable years
before the date of relinquishment.
``(d) Exempt Property; Special Rules for Pension Plans.--
``(1) Exempt property.--This section shall not apply to the
following:
``(A) United states real property interests.--Any United
States real property interest (as defined in section
897(c)(1)), other than stock of a United States real property
holding corporation which does not, on the day before the
expatriation date, meet the requirements of section
897(c)(2).
``(B) Specified property.--Any property or interest in
property not described in subparagraph (A) which the
Secretary specifies in regulations.
``(2) Special rules for certain retirement plans.--
``(A) In general.--If a covered expatriate holds on the day
before the expatriation date any interest in a retirement
plan to which this paragraph applies--
``(i) such interest shall not be treated as sold for
purposes of subsection (a)(1), but
``(ii) an amount equal to the present value of the
expatriate's nonforfeitable accrued benefit shall be treated
as having been received by such individual on such date as a
distribution under the plan.
``(B) Treatment of subsequent distributions.--In the case
of any distribution on or after the expatriation date to or
on behalf of the covered expatriate from a plan from which
the expatriate was treated as receiving a distribution under
subparagraph (A), the amount otherwise includible in gross
income by reason of the subsequent distribution shall be
reduced by the excess of the amount includible in gross
income under subparagraph (A) over any portion of such amount
to which this subparagraph previously applied.
``(C) Treatment of subsequent distributions by plan.--For
purposes of this title, a retirement plan to which this
paragraph applies, and any person acting on the plan's
behalf, shall treat any subsequent distribution described in
subparagraph (B) in the same manner as such distribution
would be treated without regard to this paragraph.
``(D) Applicable plans.--This paragraph shall apply to--
``(i) any qualified retirement plan (as defined in section
4974(c)),
``(ii) an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in
section 457(e)(1)(A), and
``(iii) to the extent provided in regulations, any foreign
pension plan or similar retirement arrangements or programs.
``(e) Definitions.--For purposes of this section--
``(1) Expatriate.--The term `expatriate' means--
``(A) any United States citizen who relinquishes
citizenship, and
``(B) any long-term resident of the United States who--
``(i) ceases to be a lawful permanent resident of the
United States (within the meaning of section 7701(b)(6)), or
``(ii) commences to be treated as a resident of a foreign
country under the provisions of a tax treaty between the
United States and the foreign country and who does not waive
the benefits of such treaty applicable to residents of the
foreign country.
``(2) Expatriation date.--The term `expatriation date'
means--
``(A) the date an individual relinquishes United States
citizenship, or
``(B) in the case of a long-term resident of the United
States, the date of the event described in clause (i) or (ii)
of paragraph (1)(B).
``(3) Relinquishment of citizenship.--A citizen shall be
treated as relinquishing United States citizenship on the
earliest of--
``(A) the date the individual renounces such individual's
United States nationality before a diplomatic or consular
officer of the United States pursuant to paragraph (5) of
section 349(a) of the Immigration and Nationality Act (8
U.S.C. 1481(a)(5)),
``(B) the date the individual furnishes to the United
States Department of State a signed statement of voluntary
relinquishment of United States nationality confirming the
performance of an act of expatriation specified in paragraph
(1), (2), (3), or (4) of section 349(a) of the Immigration
and Nationality Act (8 U.S.C. 1481(a)(1)-(4)),
``(C) the date the United States Department of State issues
to the individual a certificate of loss of nationality, or
``(D) the date a court of the United States cancels a
naturalized citizen's certificate of naturalization.
Subparagraph (A) or (B) shall not apply to any individual
unless the renunciation or voluntary relinquishment is
subsequently approved by the issuance to the individual of a
certificate of loss of nationality by the United States
Department of State.
``(4) Long-term resident.--The term `long-term resident'
has the meaning given to such term by section 877(e)(2).
``(f) Special Rules Applicable to Beneficiaries' Interests
in Trust.--
``(1) In general.--Except as provided in paragraph (2), if
an individual is determined under paragraph (3) to hold an
interest in a trust on the day before the expatriation date--
``(A) the individual shall not be treated as having sold
such interest,
``(B) such interest shall be treated as a separate share in
the trust, and
``(C)(i) such separate share shall be treated as a separate
trust consisting of the assets allocable to such share,
``(ii) the separate trust shall be treated as having sold
its assets on the day before the expatriation date for their
fair market value and as having distributed all of its assets
to the individual as of such time, and
``(iii) the individual shall be treated as having
recontributed the assets to the separate trust.
Subsection (a)(2) shall apply to any income, gain, or loss of
the individual arising from a distribution described in
subparagraph (C)(ii). In determining the amount of such
distribution, proper adjustments shall be made for
liabilities of the trust allocable to an individual's share
in the trust.
``(2) Special rules for interests in qualified trusts.--
``(A) In general.--If the trust interest described in
paragraph (1) is an interest in a qualified trust--
``(i) paragraph (1) and subsection (a) shall not apply, and
``(ii) in addition to any other tax imposed by this title,
there is hereby imposed on each distribution with respect to
such interest a tax in the amount determined under
subparagraph (B).
``(B) Amount of tax.--The amount of tax under subparagraph
(A)(ii) shall be equal to the lesser of--
``(i) the highest rate of tax imposed by section 1(e) for
the taxable year which includes the day before the
expatriation date, multiplied by the amount of the
distribution, or
``(ii) the balance in the deferred tax account immediately
before the distribution determined without regard to any
increases under subparagraph (C)(ii) after the 30th day
preceding the distribution.
``(C) Deferred tax account.--For purposes of subparagraph
(B)(ii)--
``(i) Opening balance.--The opening balance in a deferred
tax account with respect to any trust interest is an amount
equal to the tax which would have been imposed on the
allocable expatriation gain with respect to the trust
interest if such gain had been included in gross income under
subsection (a).
``(ii) Increase for interest.--The balance in the deferred
tax account shall be increased by the amount of interest
determined (on the balance in the account at the time the
interest accrues), for periods after the 90th day after the
expatriation date, by using the rates and method applicable
under
[[Page S6379]]
section 6621 for underpayments of tax for such periods,
except that section 6621(a)(2) shall be applied by
substituting `5 percentage points' for `3 percentage points'
in subparagraph (B) thereof.
``(iii) Decrease for taxes previously paid.--The balance in
the tax deferred account shall be reduced--
``(I) by the amount of taxes imposed by subparagraph (A) on
any distribution to the person holding the trust interest,
and
``(II) in the case of a person holding a nonvested
interest, to the extent provided in regulations, by the
amount of taxes imposed by subparagraph (A) on distributions
from the trust with respect to nonvested interests not held
by such person.
``(D) Allocable expatriation gain.--For purposes of this
paragraph, the allocable expatriation gain with respect to
any beneficiary's interest in a trust is the amount of gain
which would be allocable to such beneficiary's vested and
nonvested interests in the trust if the beneficiary held
directly all assets allocable to such interests.
``(E) Tax deducted and withheld.--
``(i) In general.--The tax imposed by subparagraph (A)(ii)
shall be deducted and withheld by the trustees from the
distribution to which it relates.
``(ii) Exception where failure to waive treaty rights.--If
an amount may not be deducted and withheld under clause (i)
by reason of the distributee failing to waive any treaty
right with respect to such distribution--
``(I) the tax imposed by subparagraph (A)(ii) shall be
imposed on the trust and each trustee shall be personally
liable for the amount of such tax, and
``(II) any other beneficiary of the trust shall be entitled
to recover from the distributee the amount of such tax
imposed on the other beneficiary.
``(F) Disposition.--If a trust ceases to be a qualified
trust at any time, a covered expatriate disposes of an
interest in a qualified trust, or a covered expatriate
holding an interest in a qualified trust dies, then, in lieu
of the tax imposed by subparagraph (A)(ii), there is hereby
imposed a tax equal to the lesser of--
``(i) the tax determined under paragraph (1) as if the day
before the expatriation date were the date of such cessation,
disposition, or death, whichever is applicable, or
``(ii) the balance in the tax deferred account immediately
before such date.
Such tax shall be imposed on the trust and each trustee shall
be personally liable for the amount of such tax and any other
beneficiary of the trust shall be entitled to recover from
the covered expatriate or the estate the amount of such tax
imposed on the other beneficiary.
``(G) Definitions and special rules.--For purposes of this
paragraph--
``(i) Qualified trust.--The term `qualified trust' means a
trust which is described in section 7701(a)(30)(E).
``(ii) Vested interest.--The term `vested interest' means
any interest which, as of the day before the expatriation
date, is vested in the beneficiary.
``(iii) Nonvested interest.--The term `nonvested interest'
means, with respect to any beneficiary, any interest in a
trust which is not a vested interest. Such interest shall be
determined by assuming the maximum exercise of discretion in
favor of the beneficiary and the occurrence of all
contingencies in favor of the beneficiary.
``(iv) Adjustments.--The Secretary may provide for such
adjustments to the bases of assets in a trust or a deferred
tax account, and the timing of such adjustments, in order to
ensure that gain is taxed only once.
``(v) Coordination with retirement plan rules.--This
subsection shall not apply to an interest in a trust which is
part of a retirement plan to which subsection (d)(2) applies.
``(3) Determination of beneficiaries' interest in trust.--
``(A) Determinations under paragraph (1).--For purposes of
paragraph (1), a beneficiary's interest in a trust shall be
based upon all relevant facts and circumstances, including
the terms of the trust instrument and any letter of wishes or
similar document, historical patterns of trust distributions,
and the existence of and functions performed by a trust
protector or any similar adviser.
``(B) Other determinations.--For purposes of this section--
``(i) Constructive ownership.--If a beneficiary of a trust
is a corporation, partnership, trust, or estate, the
shareholders, partners, or beneficiaries shall be deemed to
be the trust beneficiaries for purposes of this section.
``(ii) Taxpayer return position.--A taxpayer shall clearly
indicate on its income tax return--
``(I) the methodology used to determine that taxpayer's
trust interest under this section, and
``(II) if the taxpayer knows (or has reason to know) that
any other beneficiary of such trust is using a different
methodology to determine such beneficiary's trust interest
under this section.
``(g) Termination of Deferrals, etc.--In the case of any
covered expatriate, notwithstanding any other provision of
this title--
``(1) any period during which recognition of income or gain
is deferred shall terminate on the day before the
expatriation date, and
``(2) any extension of time for payment of tax shall cease
to apply on the day before the expatriation date and the
unpaid portion of such tax shall be due and payable at the
time and in the manner prescribed by the Secretary.
``(h) Imposition of Tentative Tax.--
``(1) In general.--If an individual is required to include
any amount in gross income under subsection (a) for any
taxable year, there is hereby imposed, immediately before the
expatriation date, a tax in an amount equal to the amount of
tax which would be imposed if the taxable year were a short
taxable year ending on the expatriation date.
``(2) Due date.--The due date for any tax imposed by
paragraph (1) shall be the 90th day after the expatriation
date.
``(3) Treatment of tax.--Any tax paid under paragraph (1)
shall be treated as a payment of the tax imposed by this
chapter for the taxable year to which subsection (a) applies.
``(4) Deferral of tax.--The provisions of subsection (b)
shall apply to the tax imposed by this subsection to the
extent attributable to gain includible in gross income by
reason of this section.
``(i) Special Liens for Deferred Tax Amounts.--
``(1) Imposition of lien.--
``(A) In general.--If a covered expatriate makes an
election under subsection (a)(4) or (b) which results in the
deferral of any tax imposed by reason of subsection (a), the
deferred amount (including any interest, additional amount,
addition to tax, assessable penalty, and costs attributable
to the deferred amount) shall be a lien in favor of the
United States on all property of the expatriate located in
the United States (without regard to whether this section
applies to the property).
``(B) Deferred amount.--For purposes of this subsection,
the deferred amount is the amount of the increase in the
covered expatriate's income tax which, but for the election
under subsection (a)(4) or (b), would have occurred by reason
of this section for the taxable year including the
expatriation date.
``(2) Period of lien.--The lien imposed by this subsection
shall arise on the expatriation date and continue until--
``(A) the liability for tax by reason of this section is
satisfied or has become unenforceable by reason of lapse of
time, or
``(B) it is established to the satisfaction of the
Secretary that no further tax liability may arise by reason
of this section.
``(3) Certain rules apply.--The rules set forth in
paragraphs (1), (3), and (4) of section 6324A(d) shall apply
with respect to the lien imposed by this subsection as if it
were a lien imposed by section 6324A.
``(j) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Inclusion in Income of Gifts and Bequests Received by
United States Citizens and Residents From Expatriates.--
Section 102 (relating to gifts, etc. not included in gross
income) is amended by adding at the end the following new
subsection:
``(d) Gifts and Inheritances From Covered Expatriates.--
``(1) In general.--Subsection (a) shall not exclude from
gross income the value of any property acquired by gift,
bequest, devise, or inheritance from a covered expatriate
after the expatriation date. For purposes of this subsection,
any term used in this subsection which is also used in
section 877A shall have the same meaning as when used in
section 877A.
``(2) Exceptions for transfers otherwise subject to estate
or gift tax.--Paragraph (1) shall not apply to any property
if either--
``(A) the gift, bequest, devise, or inheritance is--
``(i) shown on a timely filed return of tax imposed by
chapter 12 as a taxable gift by the covered expatriate, or
``(ii) included in the gross estate of the covered
expatriate for purposes of chapter 11 and shown on a timely
filed return of tax imposed by chapter 11 of the estate of
the covered expatriate, or
``(B) no such return was timely filed but no such return
would have been required to be filed even if the covered
expatriate were a citizen or long-term resident of the United
States.''.
(c) Definition of Termination of United States
Citizenship.--Section 7701(a) is amended by adding at the end
the following new paragraph:
``(48) Termination of united states citizenship.--
``(A) In general.--An individual shall not cease to be
treated as a United States citizen before the date on which
the individual's citizenship is treated as relinquished under
section 877A(e)(3).
``(B) Dual citizens.--Under regulations prescribed by the
Secretary, subparagraph (A) shall not apply to an individual
who became at birth a citizen of the United States and a
citizen of another country.''.
(d) Ineligibility for Visa or Admission to United States.--
(1) In general.--Section 212(a)(10)(E) of the Immigration
and Nationality Act (8 U.S.C. 1182(a)(10)(E)) is amended to
read as follows:
``(E) Former citizens not in compliance with expatriation
revenue provisions.--Any alien who is a former citizen of the
United States who relinquishes United States citizenship
(within the meaning of section 877A(e)(3) of the Internal
Revenue Code of 1986) and who is not in compliance
[[Page S6380]]
with section 877A of such Code (relating to expatriation).''.
(2) Availability of information.--
(A) In general.--Section 6103(l) (relating to disclosure of
returns and return information for purposes other than tax
administration) is amended by adding at the end the following
new paragraph:
``(19) Disclosure to deny visa or admission to certain
expatriates.--Upon written request of the Attorney General or
the Attorney General's delegate, the Secretary shall disclose
whether an individual is in compliance with section 877A (and
if not in compliance, any items of noncompliance) to officers
and employees of the Federal agency responsible for
administering section 212(a)(10)(E) of the Immigration and
Nationality Act solely for the purpose of, and to the extent
necessary in, administering such section 212(a)(10)(E).''.
(B) Safeguards.--
(i) Technical amendments.--Paragraph (4) of section 6103(p)
of the Internal Revenue Code of 1986, as amended by section
202(b)(2)(B) of the Trade Act of 2002 (Public Law 107-210;
116 Stat. 961), is amended by striking ``or (17)'' after
``any other person described in subsection (l)(16)'' each
place it appears and inserting ``or (18)''.
(ii) Conforming amendments.--Section 6103(p)(4) (relating
to safeguards), as amended by clause (i), is amended by
striking ``or (18)'' after ``any other person described in
subsection (l)(16)'' each place it appears and inserting
``(18), or (19)''.
(3) Effective dates.--
(A) In general.--Except as provided in subparagraph (B),
the amendments made by this subsection shall apply to
individuals who relinquish United States citizenship on or
after the date of the enactment of this Act.
(B) Technical amendments.--The amendments made by paragraph
(2)(B)(i) shall take effect as if included in the amendments
made by section 202(b)(2)(B) of the Trade Act of 2002 (Public
Law 107-210; 116 Stat. 961).
(e) Conforming Amendments.--
(1) Section 877 is amended by adding at the end the
following new subsection:
``(g) Application.--This section shall not apply to an
expatriate (as defined in section 877A(e)) whose expatriation
date (as so defined) occurs on or after February 5, 2003.''.
(2) Section 2107 is amended by adding at the end the
following new subsection:
``(f) Application.--This section shall not apply to any
expatriate subject to section 877A.''.
(3) Section 2501(a)(3) is amended by adding at the end the
following new subparagraph:
``(F) Application.--This paragraph shall not apply to any
expatriate subject to section 877A.''.
(4)(A) Paragraph (1) of section 6039G(d) is amended by
inserting ``or 877A'' after ``section 877''.
(B) The second sentence of section 6039G(e) is amended by
inserting ``or who relinquishes United States citizenship
(within the meaning of section 877A(e)(3))'' after
``877(a))''.
(C) Section 6039G(f) is amended by inserting ``or
877A(e)(2)(B)'' after ``877(e)(1)''.
(f) Clerical Amendment.--The table of sections for subpart
A of part II of subchapter N of chapter 1 is amended by
inserting after the item relating to section 877 the
following new item:
``Sec. 877A. Tax responsibilities of expatriation.''.
(g) Effective Date.--
(1) In general.--Except as provided in this subsection, the
amendments made by this section shall apply to expatriates
(within the meaning of section 877A(e) of the Internal
Revenue Code of 1986, as added by this section) whose
expatriation date (as so defined) occurs on or after February
5, 2003.
(2) Gifts and bequests.--Section 102(d) of the Internal
Revenue Code of 1986 (as added by subsection (b)) shall apply
to gifts and bequests received on or after February 5, 2003,
from an individual or the estate of an individual whose
expatriation date (as so defined) occurs after such date.
(3) Due date for tentative tax.--The due date under section
877A(h)(2) of the Internal Revenue Code of 1986, as added by
this section, shall in no event occur before the 90th day
after the date of the enactment of this Act.
SEC. 441. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.
(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.
``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.
Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base In Certain
Inversion Transactions To Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',
then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).
For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any
[[Page S6381]]
income or gain required to be recognized under section 304,
311(b), 367, 1001, or 1248, or under any other provision of
chapter 1, by reason of the transfer during the applicable
period of stock or other properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.
The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and such deficiency may
be assessed before the expiration of such 3-year period
notwithstanding the provisions of any other law or rule of
law which would otherwise prevent such assessment.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not filed in good faith or does not
substantially comply with such requirements.
If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.
``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--
``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is under such common control with any member
of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.
``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
[[Page S6382]]
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved in
transactions to which section 7874 of such Code (as added by
subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:
``Sec. 7874. Rules relating to inverted corporate entities.''.
(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.
SEC. 442. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.
(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:
``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS
``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.
``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.
``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only If Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.
``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).
Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or to any specified stock
compensation (as defined in section 5000A) on which tax is
imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:
``Chapter 48. Stock compensation of insiders in inverted
corporations.''.
(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and
[[Page S6383]]
(e)(1) of section 5000A of the Internal Revenue Code of 1986,
as added by this section.
SEC. 443. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.
(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.
Subtitle E--Additional Provisions
SEC. 451. TREATMENT OF NONQUALIFIED DEFERRED COMPENSATION
PLANS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 409A. INCLUSION IN GROSS INCOME OF DEFERRED
COMPENSATION UNDER NONQUALIFIED DEFERRED
COMPENSATION PLANS.
``(a) Rules Relating to Constructive Receipt.--
``(1) In general.--
``(A) Gross income inclusion.--In the case of a
nonqualified deferred compensation plan, all compensation
deferred under the plan for all taxable years (to the extent
not previously included in gross income) shall be includible
in gross income for the taxable year unless at all times
during the taxable year the plan meets the requirements of
paragraphs (2), (3), and (4) and is operated in accordance
with such requirements.
``(B) Interest on tax liability payable with respect to
previously deferred compensation.--
``(i) In general.--If compensation is required to be
included in gross income under subparagraph (A) for a taxable
year, the tax imposed by this chapter for such taxable year
shall be increased by the amount of interest determined under
clause (ii).
``(ii) Interest.--For purposes of clause (i), the interest
determined under this clause for any taxable year is the
amount of interest at the underpayment rate plus 1 percentage
point on the underpayments that would have occurred had the
deferred compensation been includible in gross income for the
taxable year in which first deferred.
``(2) Distributions.--
``(A) In general.--The requirements of this paragraph are
met if the plan provides that compensation deferred under the
plan may not be distributed earlier than--
``(i) separation from service (except as provided in
subparagraph (B)(i)),
``(ii) disability (as defined by section 223(d) of the
Social Security Act),
``(iii) death,
``(iv) a specified time (or pursuant to a fixed schedule)
specified under the plan as of the date of the deferral of
such compensation,
``(v) to the extent provided by the Secretary, a change in
the ownership or effective control of the corporation, or in
the ownership of a substantial portion of the assets of the
corporation, or
``(vi) the occurrence of an unforeseeable emergency.
``(B) Special rules.--
``(i) Specified employees.--In the case of specified
employees, the requirement of subparagraph (A)(i) is met only
if distributions may not be made earlier than 6 months after
the date of separation from service. For purposes of the
preceding sentence, a specified employee is a disqualified
individual (as defined in section 280G(c)) with respect to a
corporation the stock in which is publicly traded on an
established securities market or otherwise.
``(ii) Unforeseeable emergency.--For purposes of
subparagraph (A)(vi)--
``(I) In general.--The term `unforeseeable emergency' means
a severe financial hardship to the participant resulting from
a sudden and unexpected illness or accident of the
participant or of a dependent (as defined in section 152(a))
of the participant, loss of the participant's property due to
casualty, or other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the
control of the participant.
``(II) Limitation on distributions.--The requirement of
subparagraph (A)(vi) is met only if, as determined under
regulations of the Secretary, the amounts distributed with
respect to an emergency do not exceed the amounts necessary
to satisfy such emergency plus amounts necessary to pay taxes
reasonably anticipated as a result of the distribution, after
taking into account the extent to which such hardship is or
may be relieved through reimbursement or compensation by
insurance or otherwise or by liquidation of the participant's
assets (to the extent the liquidation of such assets would
not itself cause severe financial hardship).
``(3) Acceleration of benefits.--The requirements of this
paragraph are met if the plan does not permit the
acceleration of the time or schedule under paragraph
(2)(A)(iv).
``(4) Elections.--
``(A) In general.--The requirements of this paragraph are
met if the requirements of subparagraphs (B) and (C) are met.
``(B) Initial deferral decision.--The requirements of this
subparagraph are met if the plan provides that compensation
earned during a taxable year may be deferred at the
employee's election only if the election to defer such
compensation is made during the preceding taxable year or at
such other time as provided in regulations. In the case of
the first year in which an employee becomes eligible to
participate in the plan, such election may be made with
respect to services to be performed subsequent to the
election within 30 days after the date the employee becomes
eligible to participate in such plan.
``(C) Changes in time and form of distribution.--The
requirements of this subparagraph are met if, in the case of
a plan which permits under a subsequent election a delay in a
payment distributable under paragraph (2)(A)(iv) or a change
in the form of payment--
``(i) such election may not be made less than 12 months
prior to the date of the first scheduled payment under
paragraph (2)(A)(iv),
``(ii) the plan requires that payments with respect to
which such election is made be deferred for a period of not
less than 5 years from the date of such election, and
``(iii) an employee may make such election only once.
``(b) Rules Relating to Funding.--
``(1) Offshore property in a trust.--In the case of
property set aside (directly or indirectly) in a trust (or
other arrangement determined by the Secretary) for purposes
of paying deferred compensation under a nonqualified deferred
compensation plan, such property shall be treated as
transferred for purposes of section 83 whether or not such
property is available to satisfy claims of general
creditors--
``(A) at the time set aside if such property is located
outside of the United States, or
``(B) at the time transferred if such property is
subsequently transferred outside of the United States.
``(2) Employer's financial health.--In the case of a
nonqualified deferred compensation plan, there is a transfer
of property within the meaning of section 83 as of the
earlier of--
``(A) the date on which the plan first provides that assets
will become restricted to the provision of benefits under the
plan in connection with a change in the employer's financial
health, or
``(B) the date on which assets are so restricted.
``(3) Income inclusion for offshore trusts and employer's
financial health.--For each taxable year that assets treated
as transferred under this subsection remain set aside in a
trust or other arrangement subject to paragraph (1) or (2),
any increase in value in, or earnings with respect to, such
assets shall be treated as an additional transfer of property
under this subsection (to the extent not previously included
in income).
``(4) Interest on tax liability payable with respect to
transferred property.--
``(A) In general.--If amounts are required to be included
in gross income by reason of paragraph (1) or (2) for a
taxable year, the tax imposed by this chapter for such
taxable year shall be increased by the amount of interest
determined under subparagraph (B).
``(B) Interest.--The interest determined under this
subparagraph for any taxable year is the amount of interest
at the underpayment rate plus 1 percentage point on the
underpayments that would have occurred had the amounts so
required to be included in gross income by paragraph (1) or
(2) been includible in gross income for the taxable year in
which such assets were first set aside (directly or
indirectly) in a trust (or other arrangement determined by
the Secretary) for purposes of the nonqualified deferred
compensation plan.
``(c) No Inference on Earlier Income Inclusion.--Nothing in
this section shall be construed to prevent the inclusion of
amounts in gross income under any other provision of this
chapter or any other rule of law earlier than the time
provided in this section.
``(d) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Nonqualified deferred compensation plan.--The term
`nonqualified deferred compensation plan' means any plan that
provides for the deferral of compensation other than a
qualified employer plan.
``(2) Qualified employer plan.--The term `qualified
employer plan' means--
``(A) any plan, contract, pension, account, or trust
described in subparagraph (A) or (B) of section 219(g)(5),
and
``(B) any eligible deferred compensation plan (within the
meaning of section 457(b)) of an employer described in
section 457(e)(1)(A).
``(3) Plan includes arrangements, etc.--The term `plan'
includes any agreement or arrangement, including an agreement
or arrangement that includes one person.
``(4) Treatment of earnings.--References to deferred
compensation shall be treated as including references to
income (whether actual or notional) attributable to such
compensation or such income.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including regulations--
``(1) providing for the determination of amounts of
deferral in the case of a nonqualified deferred compensation
plan which is a defined benefit plan,
``(2) relating to changes in the ownership and control of a
corporation or assets of a corporation for purposes of
subsection (a)(2)(A)(v),
``(3) exempting arrangements from the application of
subsection (b) if such arrangements will not result in an
improper deferral of United States tax and will not result in
assets being effectively beyond the reach of creditors, and
``(4) defining financial health for purposes of subsection
(b)(2).''.
(b) W-2 Forms.--
[[Page S6384]]
(1) In general.--Subsection (a) of section 6051 (relating
to receipts for employees) is amended by striking ``and'', by
striking the period at the end of paragraph (11) and
inserting ``, and'', and by inserting after paragraph (11)
the following new paragraph:
``(12) the total amount of deferrals under a nonqualified
deferred compensation plan (within the meaning of section
409A(d)).''.
(2) Threshold.--Subsection (a) of section 6051 is amended
by adding at the end the following: ``In the case of the
amounts required to be shown by paragraph (12), the Secretary
may (by regulation) establish a minimum amount of deferrals
below which paragraph (12) does not apply.''.
(c) Conforming and Clerical Amendments.--
(1) Section 414(b) is amended by inserting ``409A,'' after
``408(p),''.
(2) Section 414(c) is amended by inserting ``409A,'' after
``408(p),''.
(3) The table of sections for such subpart A is amended by
adding at the end the following new item:
``Sec. 409A. Inclusion in gross income of deferred compensation under
nonqualified deferred compensation plans.''.
(d) Effective Date.--The amendments made by this section
shall apply to amounts deferred in taxable years beginning
after December 31, 2003.
SEC. 452. EXTENSION OF CUSTOMS USER FEES.
Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended
by striking ``September 30, 2003'' and inserting ``September
30, 2013''.
______
SA 618. Mr. ROCKEFELLER (for himself, Mr. Daschle, Mr. Bingaman, Mr.
Harkin, Mr. Kennedy, Mr. Pryor, Mrs. Murray, Mr. Kerry, Mr. Reid, Mr.
Johnson, Mr. Levin, and Mr. Reed) submitted an amendment intended to be
proposed by him to the bill S. 1054, to provide for reconciliation
pursuant to section 201 of the concurrent resolution on the budget for
fiscal year 2004; which was ordered to lie on the table; as follows:
On page 281, between lines 2 and 3, insert the following:
Subtitle D--Public School Modernization
SEC. 531. EXPANSION OF INCENTIVES FOR PUBLIC SCHOOLS.
(a) In General.--Chapter 1 is amended by adding at the end
the following new subchapter:
``Subchapter Z--Public School Modernization Provisions
``Sec. 1400M. Credit to holders of qualified public school
modernization bonds.
``Sec. 1400N. Qualified school construction bonds.
``Sec. 1400O. Qualified zone academy bonds.
``Sec. 1400P. Qualified tribal school modernization bonds.
``SEC. 1400M. CREDIT TO HOLDERS OF QUALIFIED PUBLIC SCHOOL
MODERNIZATION BONDS.
``(a) Allowance of Credit.--In the case of a taxpayer who
holds a qualified public school modernization bond on a
credit allowance date of such bond which occurs during the
taxable year, there shall be allowed as a credit against the
tax imposed by this chapter for such taxable year an amount
equal to the sum of the credits determined under subsection
(b) with respect to credit allowance dates during such year
on which the taxpayer holds such bond.
``(b) Amount of Credit.--
``(1) In general.--The amount of the credit determined
under this subsection with respect to any credit allowance
date for a qualified public school modernization bond is 25
percent of the annual credit determined with respect to such
bond.
``(2) Annual credit.--The annual credit determined with
respect to any qualified public school modernization bond is
the product of--
``(A) the applicable credit rate, multiplied by
``(B) the outstanding face amount of the bond.
``(3) Applicable credit rate.--For purposes of paragraph
(1), the applicable credit rate with respect to an issue is
the rate equal to an average market yield (as of the day
before the date of issuance of the issue) on outstanding
long-term corporate debt obligations (determined under
regulations prescribed by the Secretary).
``(4) Special rule for issuance and redemption.--In the
case of a bond which is issued during the 3-month period
ending on a credit allowance date, the amount of the credit
determined under this subsection with respect to such credit
allowance date shall be a ratable portion of the credit
otherwise determined based on the portion of the 3-month
period during which the bond is outstanding. A similar rule
shall apply when the bond is redeemed.
``(c) Limitation Based on Amount of Tax.--
``(1) In general.--The credit allowed under subsection (a)
for any taxable year shall not exceed the excess of--
``(A) the sum of the regular tax liability (as defined in
section 26(b)) plus the tax imposed by section 55, over
``(B) the sum of the credits allowable under part IV of
subchapter A (other than subpart C thereof, relating to
refundable credits).
``(2) Carryover of unused credit.--If the credit allowable
under subsection (a) exceeds the limitation imposed by
paragraph (1) for such taxable year, such excess shall be
carried to the succeeding taxable year and added to the
credit allowable under subsection (a) for such taxable year.
``(d) Qualified Public School Modernization Bond; Credit
Allowance Date.--For purposes of this section--
``(1) Qualified public school modernization bond.--The term
`qualified public school modernization bond' means--
``(A) a qualified zone academy bond,
``(B) a qualified school construction bond, and
``(C) a qualified tribal school modernization bond.
``(2) Credit allowance date.--The term `credit allowance
date' means--
``(A) March 15,
``(B) June 15,
``(C) September 15, and
``(D) December 15.
Such term includes the last day on which the bond is
outstanding.
``(e) Other Definitions.--For purposes of this subchapter--
``(1) Local educational agency.--The term `local
educational agency' has the meaning given to such term by
section 9101 of the Elementary and Secondary Education Act of
1965. Such term includes the local educational agency that
serves the District of Columbia but does not include any
other State agency.
``(2) Bond.--The term `bond' includes any obligation.
``(3) State.--The term `State' includes the District of
Columbia and any possession of the United States.
``(4) Public school facility.--The term `public school
facility' shall not include--
``(A) any stadium or other facility primarily used for
athletic contests or exhibitions or other events for which
admission is charged to the general public, or
``(B) any facility which is not owned by a State or local
government or any agency or instrumentality of a State or
local government.
``(f) Credit Included in Gross Income.--Gross income
includes the amount of the credit allowed to the taxpayer
under this section (determined without regard to subsection
(c)) and the amount so included shall be treated as interest
income.
``(g) Recapture of Portion of Credit Where Cessation of
Compliance.--
``(1) In general.--If any bond which when issued purported
to be a qualified public school modernization bond ceases to
be a qualified public school modernization bond, the issuer
shall pay to the United States (at the time required by the
Secretary) an amount equal to the sum of--
``(A) the aggregate of the credits allowable under this
section with respect to such bond (determined without regard
to subsection (c)) for taxable years ending during the
calendar year in which such cessation occurs and the 2
preceding calendar years, and
``(B) interest at the underpayment rate under section 6621
on the amount determined under subparagraph (A) for each
calendar year for the period beginning on the first day of
such calendar year.
``(2) Failure to pay.--If the issuer fails to timely pay
the amount required by paragraph (1) with respect to such
bond, the tax imposed by this chapter on each holder of any
such bond which is part of such issue shall be increased (for
the taxable year of the holder in which such cessation
occurs) by the aggregate decrease in the credits allowed
under this section to such holder for taxable years beginning
in such 3 calendar years which would have resulted solely
from denying any credit under this section with respect to
such issue for such taxable years.
``(3) Special rules.--
``(A) Tax benefit rule.--The tax for the taxable year shall
be increased under paragraph (2) only with respect to credits
allowed by reason of this section which were used to reduce
tax liability. In the case of credits not so used to reduce
tax liability, the carryforwards and carrybacks under section
39 shall be appropriately adjusted.
``(B) No credits against tax.--Any increase in tax under
paragraph (2) shall not be treated as a tax imposed by this
chapter for purposes of determining--
``(i) the amount of any credit allowable under this part,
or
``(ii) the amount of the tax imposed by section 55.
``(h) Bonds Held by Regulated Investment Companies.--If any
qualified public school modernization bond is held by a
regulated investment company, the credit determined under
subsection (a) shall be allowed to shareholders of such
company under procedures prescribed by the Secretary.
``(i) Credits May Be Stripped.--Under regulations
prescribed by the Secretary--
``(1) In general.--There may be a separation (including at
issuance) of the ownership of a qualified public school
modernization bond and the entitlement to the credit under
this section with respect to such bond. In case of any such
separation, the credit under this section shall be allowed to
the person who on the credit allowance date holds the
instrument evidencing the entitlement to the credit and not
to the holder of the bond.
``(2) Certain rules to apply.--In the case of a separation
described in paragraph (1), the rules of section 1286 shall
apply to the qualified public school modernization bond as if
it were a stripped bond and to the credit
[[Page S6385]]
under this section as if it were a stripped coupon.
``(j) Treatment for Estimated Tax Purposes.--Solely for
purposes of sections 6654 and 6655, the credit allowed by
this section to a taxpayer by reason of holding a qualified
public school modernization bonds on a credit allowance date
shall be treated as if it were a payment of estimated tax
made by the taxpayer on such date.
``(k) Credit May Be Transferred.--Nothing in any law or
rule of law shall be construed to limit the transferability
of the credit allowed by this section through sale and
repurchase agreements.
``(l) Reporting.--Issuers of qualified public school
modernization bonds shall submit reports similar to the
reports required under section 149(e).
``(m) Termination.--This section shall not apply to any
bond issued after September 30, 2007 (December 31, 2012, in
the case of any qualified tribal school modernization bond).
``SEC. 1400N. QUALIFIED SCHOOL CONSTRUCTION BONDS.
``(a) Qualified School Construction Bond.--For purposes of
this subchapter, the term `qualified school construction
bond' means any bond issued as part of an issue if--
``(1) 95 percent or more of the proceeds of such issue are
to be used for the construction, rehabilitation, or repair of
a public school facility or for the acquisition of land on
which such a facility is to be constructed with part of the
proceeds of such issue,
``(2) the bond is issued by a State or local government
within the jurisdiction of which such school is located,
``(3) the issuer designates such bond for purposes of this
section, and
``(4) the term of each bond which is part of such issue
does not exceed 15 years.
``(b) Limitation on Amount of Bonds Designated.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (a) by
any issuer shall not exceed the limitation amount allocated
under subsection (d) for such calendar year to such issuer.
``(c) National Limitation on Amount of Bonds Designated.--
There is a national qualified school construction bond
limitation for each calendar year. Such limitation is--
``(1) $11,000,000,000 for 2004,
``(2) $11,000,000,000 for 2005, and
``(3) except as provided in subsection (f), zero after
2005.
``(d) Limitation Allocated Among States.--
``(1) In general.--The limitation applicable under
subsection (c) for any calendar year shall be allocated by
the Secretary among the States in proportion to the
respective amounts each such State received for basic grants
under section 1124 of the Elementary and Secondary Education
Act of 1965 for the most recent fiscal year ending before
such calendar year. The limitation amount allocated to a
State under the preceding sentence shall be allocated by the
State to issuers within such State.
``(2) Minimum allocations to states.--
``(A) In general.--The Secretary shall adjust the
allocations under this subsection for any calendar year for
each State to the extent necessary to ensure that the amount
allocated to such State under this subsection for such year
is not less than an amount equal to such State's minimum
percentage of the amount to be allocated under paragraph (1)
for the calendar year.
``(B) Minimum percentage.--A State's minimum percentage for
any calendar year is the minimum percentage described in
section 1124(d) of the Elementary and Secondary Education Act
of 1965 for such State for the most recent fiscal year ending
before such calendar year.
``(3) Allocations to certain possessions.--The amount to be
allocated under paragraph (1) to any possession of the United
States other than Puerto Rico shall be the amount which would
have been allocated if all allocations under paragraph (1)
were made on the basis of respective populations of
individuals below the poverty line (as defined by the Office
of Management and Budget). In making other allocations, the
amount to be allocated under paragraph (1) shall be reduced
by the aggregate amount allocated under this paragraph to
possessions of the United States.
``(e) Carryover of Unused Limitation.--If for any calendar
year--
``(1) the amount allocated under subsection (d) to any
State, exceeds
``(2) the amount of bonds issued during such year which are
designated under subsection (a) pursuant to such allocation,
the limitation amount under such subsection for such State
for the following calendar year shall be increased by the
amount of such excess. A similar rule shall apply to the
amounts allocated under subsection (d)(4).
``(f) Special Rules Relating to Arbitrage.--
``(1) In general.--A bond shall not be treated as failing
to meet the requirement of subsection (a)(1) solely by reason
of the fact that the proceeds of the issue of which such bond
is a part are invested for a temporary period (but not more
than 36 months) until such proceeds are needed for the
purpose for which such issue was issued.
``(2) Binding commitment requirement.--Paragraph (1) shall
apply to an issue only if, as of the date of issuance, there
is a reasonable expectation that--
``(A) at least 10 percent of the proceeds of the issue will
be spent within the 6-month period beginning on such date for
the purpose for which such issue was issued, and
``(B) the remaining proceeds of the issue will be spent
with due diligence for such purpose.
``(3) Earnings on proceeds.--Any earnings on proceeds
during the temporary period shall be treated as proceeds of
the issue for purposes of applying subsection (a)(1) and
paragraph (1) of this subsection.
``SEC. 1400O. QUALIFIED ZONE ACADEMY BONDS.
``(a) Qualified Zone Academy Bond.--For purposes of this
subchapter--
``(1) In general.--The term `qualified zone academy bond'
means any bond issued as part of an issue if--
``(A) 95 percent or more of the proceeds of such issue are
to be used for a qualified purpose with respect to a
qualified zone academy established by a local educational
agency,
``(B) the bond is issued by a State or local government
within the jurisdiction of which such academy is located,
``(C) the issuer--
``(i) designates such bond for purposes of this section,
``(ii) certifies that it has written assurances that the
private business contribution requirement of paragraph (2)
will be met with respect to such academy, and
``(iii) certifies that it has the written approval of the
local educational agency for such bond issuance, and
``(D) the term of each bond which is part of such issue
does not exceed 15 years.
Rules similar to the rules of section 1400N(f) shall apply
for purposes of paragraph (1).
``(2) Private business contribution requirement.--
``(A) In general.--For purposes of paragraph (1), the
private business contribution requirement of this paragraph
is met with respect to any issue if the local educational
agency that established the qualified zone academy has
written commitments from private entities to make qualified
contributions having a present value (as of the date of
issuance of the issue) of not less than 10 percent of the
proceeds of the issue.
``(B) Qualified contributions.--For purposes of
subparagraph (A), the term `qualified contribution' means any
contribution (of a type and quality acceptable to the local
educational agency) of--
``(i) equipment for use in the qualified zone academy
(including state-of-the-art technology and vocational
equipment),
``(ii) technical assistance in developing curriculum or in
training teachers in order to promote appropriate market
driven technology in the classroom,
``(iii) services of employees as volunteer mentors,
``(iv) internships, field trips, or other educational
opportunities outside the academy for students, or
``(v) any other property or service specified by the local
educational agency.
``(3) Qualified zone academy.--The term `qualified zone
academy' means any public school (or academic program within
a public school) which is established by and operated under
the supervision of a local educational agency to provide
education or training below the postsecondary level if--
``(A) such public school or program (as the case may be) is
designed in cooperation with business to enhance the academic
curriculum, increase graduation and employment rates, and
better prepare students for the rigors of college and the
increasingly complex workforce,
``(B) students in such public school or program (as the
case may be) will be subject to the same academic standards
and assessments as other students educated by the local
educational agency,
``(C) the comprehensive education plan of such public
school or program is approved by the local educational
agency, and
``(D)(i) such public school is located in an empowerment
zone or enterprise community (including any such zone or
community designated after the date of the enactment of this
section), or
``(ii) there is a reasonable expectation (as of the date of
issuance of the bonds) that at least 35 percent of the
students attending such school or participating in such
program (as the case may be) will be eligible for free or
reduced-cost lunches under the school lunch program
established under the Richard B. Russell National School
Lunch Act.
``(4) Qualified purpose.--The term `qualified purpose'
means, with respect to any qualified zone academy--
``(A) constructing, rehabilitating, or repairing the public
school facility in which the academy is established,
``(B) acquiring the land on which such facility is to be
constructed with part of the proceeds of such issue,
``(C) providing equipment for use at such academy,
``(D) developing course materials for education to be
provided at such academy, and
``(E) training teachers and other school personnel in such
academy.
``(b) Limitations on Amount of Bonds Designated.--
``(1) In general.--There is a national zone academy bond
limitation for each calendar year. Such limitation is--
``(A) $400,000,000 for 1998,
``(B) $400,000,000 for 1999,
``(C) $400,000,000 for 2000,
``(D) $400,000,000 for 2001,
``(E) $400,000,000 for 2002,
``(F) $400,000,000 for 2003,
[[Page S6386]]
``(G) $1,400,000,000 for 2004,
``(H) $1,400,000,000 for 2005, and
``(I) except as provided in paragraph (3), zero after 2005.
``(2) Allocation of limitation.--
``(A) Allocation among states.--
``(i) 1998, 1999, 2000, 2001, 2002, and 2003 limitations.--
The national zone academy bond limitations for calendar years
1998, 1999, 2000, 2001, 2002, and 2003 shall be allocated by
the Secretary among the States on the basis of their
respective populations of individuals below the poverty line
(as defined by the Office of Management and Budget).
``(ii) Limitation after 2003.--The national zone academy
bond limitation for any calendar year after 2003 shall be
allocated by the Secretary among the States in proportion to
the respective amounts each such State received for basic
grants under section 1124 of the Elementary and Secondary
Education Act of 1965 for the most recent fiscal year ending
before such calendar year.
``(B) Allocation to local educational agencies.--The
limitation amount allocated to a State under subparagraph (A)
shall be allocated by the State to qualified zone academies
within such State.
``(C) Designation subject to limitation amount.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under subsection (a)
with respect to any qualified zone academy shall not exceed
the limitation amount allocated to such academy under
subparagraph (B) for such calendar year.
``(3) Carryover of unused limitation.--If for any calendar
year--
``(A) the limitation amount under this subsection for any
State, exceeds
``(B) the amount of bonds issued during such year which are
designated under subsection (a) (or the corresponding
provisions of prior law) with respect to qualified zone
academies within such State,
the limitation amount under this subsection for such State
for the following calendar year shall be increased by the
amount of such excess.
``SEC. 1400P. QUALIFIED TRIBAL SCHOOL MODERNIZATION BONDS.
``(a) Qualified Tribal School Modernization Bond.--For
purposes of this subchapter--
``(1) In general.--The term `qualified tribal school
modernization bond' means, subject to paragraph (2), any bond
issued as part of an issue under section 532(c) of the Jobs
and Growth Tax Relief Reconciliation Act of 2003, as in
effect on the date of the enactment of this section, if--
``(A) 95 percent or more of the proceeds of such issue are
to be used for the construction, rehabilitation, or repair of
a school facility funded by the Bureau of Indian Affairs of
the Department of the Interior or for the acquisition of land
on which such a facility is to be constructed with part of
the proceeds of such issue,
``(B) the bond is issued by an Indian tribe,
``(C) the issuer designates such bond for purposes of this
section, and
``(D) the term of each bond which is part of such issue
does not exceed 15 years.
``(2) National limitation on amount of bonds designated.--
``(A) National limitation.--There is a national qualified
tribal school modernization bond limitation for each calendar
year. Such limitation is--
``(i) $200,000,000 for 2004,
``(ii) $200,000,000 for 2005, and
``(iii) zero after 2005.
``(B) Allocation of limitation.--The national qualified
tribal school modernization bond limitation shall be
allocated to Indian tribes by the Secretary of the Interior
subject to the provisions of section 532 of the Jobs and
Growth Tax Relief Reconciliation Act of 2003, as in effect on
the date of the enactment of this section.
``(C) Designation subject to limitation amount.--The
maximum aggregate face amount of bonds issued during any
calendar year which may be designated under paragraph (1)
with respect to any Indian tribe shall not exceed the
limitation amount allocated to such government under
subparagraph (B) for such calendar year.
``(D) Carryover of unused limitation.--If for any calendar
year--
``(i) the limitation amount under this paragraph, exceeds
``(ii) the amount of qualified tribal school modernization
bonds issued during such year,
the limitation amount under this paragraph for the following
calendar year shall be increased by the amount of such
excess. The preceding sentence shall not apply if such
following calendar year is after 2012.
``(b) Tribe.--For purposes of this section, the term
`tribe' has the meaning given the term `Indian tribal
government' by section 7701(a)(40), including the application
of section 7871(d). Such term includes any consortium of
tribes approved by the Secretary of the Interior.''.
(b) Reporting.--Subsection (d) of section 6049 (relating to
returns regarding payments of interest) is amended by adding
at the end the following new paragraph:
``(8) Reporting of credit on qualified public school
modernization bonds.--
``(A) In general.--For purposes of subsection (a), the term
`interest' includes amounts includible in gross income under
section 1400M(f) and such amounts shall be treated as paid on
the credit allowance date (as defined in section
1400M(d)(2)).
``(B) Reporting to corporations, etc.--Except as otherwise
provided in regulations, in the case of any interest
described in subparagraph (A) of this paragraph, subsection
(b)(4) of this section shall be applied without regard to
subparagraphs (A), (H), (I), (J), (K), and (L)(i).
``(C) Regulatory authority.--The Secretary may prescribe
such regulations as are necessary or appropriate to carry out
the purposes of this paragraph, including regulations which
require more frequent or more detailed reporting.''.
(c) Conforming Amendments.--
(1) Subchapter U of chapter 1 is amended by striking part
IV, by redesignating part V as part IV, and by redesignating
section 1397F as section 1397E.
(2) The table of subchapters for chapter 1 is amended by
adding at the end the following new item:
``Subchapter Z. Public school modernization provisions.''.
(3) The table of parts of subchapter U of chapter 1 is
amended by striking the last 2 items and inserting the
following new item:
``Part IV. Regulations.''.
(d) Sovereign Immunity.--This section and the amendments
made by this section shall not be construed to impact, limit,
or affect the sovereign immunity of the Federal Government or
any State or tribal government.
(e) Effective Dates.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to obligations issued after December 31, 2003.
(2) Repeal of restriction on zone academy bond holders.--In
the case of bonds to which section 1397E of the Internal
Revenue Code of 1986 (as in effect before the date of the
enactment of this Act) applies, the limitation of such
section to eligible taxpayers (as defined in subsection
(d)(6) of such section) shall not apply after the date of the
enactment of this Act.
SEC. 532. INDIAN SCHOOL CONSTRUCTION.
(a) Definitions.--In this section:
(1) Bureau.--The term ``Bureau'' means the Bureau of Indian
Affairs of the Department.
(2) Department.--The term ``Department'' means the
Department of the Interior.
(3) Escrow account.--The term ``escrow account'' means the
tribal school modernization escrow account established under
subsection (b)(6)(B)(i).
(4) Indian.--The term ``Indian'' means any individual who
is a member of an Indian tribe.
(5) Indian tribe.--
(A) In general.--The term ``Indian tribe'' has the meaning
given the term ``Indian tribal government'' by section
7701(a)(40) of the Internal Revenue Code of 1986 (including
the application of section 7871(d) of that Code).
(B) Inclusion.--The term ``Indian tribe'' includes a
consortium of Indian tribes approved by the Secretary.
(6) Secretary.--The term ``Secretary'' means the Secretary
of the Interior.
(7) Tribal school.--The term ``tribal school'' means an
elementary school, secondary school, or dormitory that--
(A) is operated by a tribal organization or the Bureau for
the education of Indian children; and
(B) under a contract, a grant, or an agreement, or for a
Bureau-operated school, receives financial assistance to pay
the costs of operation from funds made available under--
(i) section 102, 103(a), or 208 of the Indian Self-
Determination and Education Assistance Act (25 U.S.C. 450f,
450h(a), 458d); or
(ii) the Tribally Controlled Schools Act of 1988 (25 U.S.C.
2501 et seq.).
(b) Issuance of Bonds.--
(1) In general.--The Secretary shall establish a pilot
program under which eligible Indian tribes may issue
qualified tribal school modernization bonds to provide
funding for the construction, rehabilitation, or repair of
tribal schools (including the advance planning and design of
tribal schools).
(2) Eligibility.--
(A) In general.--To be eligible to issue any qualified
tribal school modernization bond under the program under
paragraph (1), an Indian tribe shall--
(i) prepare and submit to the Secretary a plan of
construction that meets the requirements of subparagraph (B);
(ii) provide for quarterly and final inspection of the
project by the Bureau; and
(iii) pledge that the facilities financed by the bond will
be used primarily for elementary and secondary educational
purposes for not less than the period during which the bond
remains outstanding.
(B) Plan of construction.--A plan of construction referred
to in subparagraph (A)(i) meets the requirements of this
subparagraph if the plan--
(i) contains a description of the construction to be
carried out with funding provided under a qualified tribal
school modernization bond;
(ii) demonstrates that a comprehensive survey has been
completed to determine the construction needs of the tribal
school involved;
(iii) contains assurances that funding under the bond will
be used only for the activities described in the plan;
(iv) contains a response to the evaluation criteria
contained in Instructions and Application for Replacement
School Construction, Revision 6, dated February 6, 1999; and
[[Page S6387]]
(v) contains any other reasonable and related information
determined to be appropriate by the Secretary.
(C) Priority.--In determining whether an Indian tribe is
eligible to participate in the program under this subsection,
the Secretary shall give priority to an Indian tribe that, as
demonstrated by the relevant plans of construction, will fund
projects--
(i) described in the Education Facilities Replacement
Construction Priorities List, as of fiscal year 2000, of the
Bureau (65 Fed. Reg. 4623);
(ii) described in any subsequent priorities list published
in the Federal Register; or
(iii) that meet the criteria for ranking schools as
described in Instructions and Application for Replacement
School Construction, Revision 6, dated February 6, 1999.
(D) Advance planning and design funding.--
(i) In general.--An Indian tribe may propose in the plan of
construction of the Indian tribe to receive advance planning
and design funding from the escrow account.
(ii) Conditions on allocation of funds.--As a condition to
the allocation to an Indian tribe of advance planning and
design funds from the escrow account under clause (i), the
Indian tribe shall agree--
(I) to issue qualified tribal school modernization bonds
after the date of receipt of the funds; and
(II) as a condition of each bond issuance, that the Indian
tribe will deposit into the escrow account, or a fund managed
by the trustee as described in paragraph (4)(C), an amount
equal to the amount of funds received from the escrow
account.
(3) Permissible activities.--In addition to the use of
funds permitted under paragraph (1), an Indian tribe may use
amounts received through the issuance of a qualified tribal
school modernization bond--
(A) to enter into and make payments under contracts with
licensed and bonded architects, engineers, and construction
firms--
(i) to determine the needs of the tribal school; and
(ii) for the design and engineering of the tribal school;
(B) enter into and make payments under contracts with
financial advisers, underwriters, attorneys, trustees, and
other professionals who would be able to provide assistance
to the Indian tribe in issuing bonds; and
(C) carry out other activities determined to be appropriate
by the Secretary.
(4) Bond trustee.--
(A) In general.--Notwithstanding any other provision of
law, any qualified tribal school modernization bond issued by
an Indian tribe under this subsection shall be subject to a
trust agreement between the Indian tribe and a trustee.
(B) Trustee.--Any bank or trust company that meets
requirements established by the Secretary may be designated
as a trustee under subparagraph (A).
(C) Content of trust agreement.--A trust agreement entered
into by an Indian tribe under this paragraph shall specify
that the trustee, with respect to any bond issued under this
subsection, shall--
(i) act as a repository for the proceeds of the bond;
(ii) make payments to bondholders;
(iii) receive, as a condition to the issuance of the bond,
a transfer of funds from the escrow account, or from other
funds furnished by or on behalf of the Indian tribe, in an
amount that (including interest earnings from the investment
of the funds in obligations of, or fully guaranteed by, the
United States, or from other investments authorized by
paragraph (10)) will produce funds sufficient to timely pay
in full the entire principal amount of the bond on the stated
maturity date of the bond;
(iv) invest the funds transferred under clause (iii) in an
investment described in that clause; and
(v)(I) hold and invest the funds transferred under clause
(iii) in a segregated fund or account under the agreement;
and
(II) use the fund or account solely for payment of the
costs of items described in paragraph (3).
(D) Requirements for making direct payments.--
(i) Payments.--
(I) In general.--Notwithstanding any other provision of
law, the trustee shall make any payment referred to in
subparagraph (C)(v) in accordance with such requirements as
the Indian tribe shall prescribe in the trust agreement
entered into under subparagraph (C).
(II) Inspection.--Before making a payment for a project to
a contractor under subparagraph (C)(v), to ensure completion
of the project, the trustee shall require an inspection of
the project by--
(aa) a local financial institution; or
(bb) an independent inspecting architect or engineer.
(ii) Contracts.--Each contract referred to in paragraph (3)
shall specify, or be renegotiated to specify, that payments
under the contract shall be made in accordance with this
paragraph.
(5) Payments of principal and interest.--
(A) Principal.--
(i) In general.--No principal payment on any qualified
tribal school modernization bond shall be required under this
subsection until the final, stated date on which the bond
reaches maturity.
(ii) Maturity; outstanding principal.--With respect to a
qualified tribal school modernization bond issued under this
subsection--
(I) the bond shall reach maturity not later than 15 years
after the date of issuance of the bond; and
(II) on the date on which the bond reaches maturity, the
entire outstanding principal under the bond shall become due
and payable.
(B) Interest.--There shall be awarded a tax credit under
section 1400M of the Internal Revenue Code of 1986 in lieu of
interest on a qualified tribal school modernization bond
issued under this subsection.
(6) Bond guarantees.--
(A) In general.--Payment of the principal portion of a
qualified tribal school modernization bond issued under this
subsection shall be guaranteed solely by amounts deposited
with each respective bond trustee as described in paragraph
(4)(C)(iii).
(B) Establishment of account.--
(i) In general.--Notwithstanding any other provision of
law, the Secretary may--
(I) establish a tribal school modernization escrow account;
and
(II) beginning in fiscal year 2004, deposit such funds as
may be appropriated for each fiscal year into the escrow
account.
(ii) Transfers of excess proceeds.--Excess proceeds held
under any trust agreement that are not needed for any of the
purposes described in clauses (iii) and (v) of paragraph
(4)(C) shall be transferred, from time to time, by the
trustee for deposit into the escrow account.
(iii) Payments.--The Secretary shall use any amounts
deposited in the escrow account under clauses (i) and (ii)--
(I) to make payments to trustees appointed and acting in
accordance with paragraph (4); or
(II) to make payments described in paragraph (2)(D).
(7) Limitations.--
(A) Obligation to repay.--
(i) In general.--Notwithstanding any other provision of
law, the principal amount on any qualified tribal school
modernization bond issued under this subsection shall be
repaid only to the extent of any escrowed funds provided
under paragraph (4)(C)(iii).
(ii) No guarantee.--No qualified tribal school
modernization bond issued by an Indian tribe under this
subsection shall be an obligation of, and no payment of the
principal of such a bond shall be guaranteed by--
(I) the United States;
(II) the Indian tribe; or
(III) the tribal school for which the bond was issued.
(B) Land and facilities.--No land or facility purchased or
improved with amounts derived from a qualified tribal school
modernization bond issued under this subsection shall be
mortgaged or used as collateral for the bond.
(8) Sale of bonds.--A qualified tribal school modernization
bond may be sold at a purchase price equal to, in excess of,
or at a discount from, the par amount of the bond.
(9) Treatment of trust agreement earnings.--No amount
earned through the investment of funds under the control of a
trustee under any trust agreement described in paragraph (4)
shall be subject to Federal income taxation.
(10) Investment of sinking funds.--A sinking fund
established for the purpose of the payment of principal on a
qualified tribal school modernization bond issued under this
subsection shall be invested in--
(A) obligations issued by or guaranteed by the United
States; or
(B) such other assets as the Secretary of the Treasury may
by regulation allow.
SEC. 533. APPLICATION OF CERTAIN LABOR STANDARDS ON
CONSTRUCTION PROJECTS FINANCED UNDER PUBLIC
SCHOOL MODERNIZATION PROGRAM.
Section 439 of the General Education Provisions Act (20
U.S.C. 1232b) is amended--
(1) by inserting ``(a)'' before ``All laborers and
mechanics'', and
(2) by adding at the end the following new subsection:
``(b)(1) For purposes of this section, the term `applicable
program' also includes the qualified zone academy bond
provisions enacted by section 226 of the Taxpayer Relief Act
of 1997 and the program established by section 531 of the
Jobs and Growth Tax Relief Reconciliation Act of 2003.
``(2) A State or local government participating in a
program described in paragraph (1) shall--
``(A) in the awarding of contracts, give priority to
contractors with substantial numbers of employees residing in
the local education area to be served by the school being
constructed; and
``(B) include in the construction contract for such school
a requirement that the contractor give priority in hiring new
workers to individuals residing in such local education area.
``(3) In the case of a program described in paragraph (1),
nothing in this subsection or subsection (a) shall be
construed to deny any tax credit allowed under such program.
If amounts are required to be withheld from contractors to
pay wages to which workers are entitled, such amounts shall
be treated as expended for construction purposes in
determining whether the requirements of such program are
met.''.
SEC. 534. EMPLOYMENT AND TRAINING ACTIVITIES RELATING TO
CONSTRUCTION OR RECONSTRUCTION OF PUBLIC SCHOOL
FACILITIES.
(a) In General.--Section 134 of the Workforce Investment
Act of 1998 (29 U.S.C. 2864)
[[Page S6388]]
is amended by adding at the end the following new subsection:
``(f) Local Employment and Training Activities Relating to
Construction or Reconstruction of Public School Facilities.--
``(1) In general.--In order to provide training services
related to construction or reconstruction of public school
facilities receiving funding assistance under an applicable
program, each State shall establish a specialized program of
training meeting the following requirements:
``(A) The specialized program provides training for jobs in
the construction industry.
``(B) The program provides trained workers for projects for
the construction or reconstruction of public school
facilities receiving funding assistance under an applicable
program.
``(C) The program ensures that skilled workers (residing in
the area to be served by the school facilities) will be
available for the construction or reconstruction work.
``(2) Coordination.--The specialized program established
under paragraph (1) shall be integrated with other activities
under this Act, with the activities carried out under the
National Apprenticeship Act of 1937 by the State
Apprenticeship Council or through the Bureau of
Apprenticeship and Training in the Department of Labor, as
appropriate, and with activities carried out under the Carl
D. Perkins Vocational and Technical Education Act of 1998.
Nothing in this subsection shall be construed to require
services duplicative of those referred to in the preceding
sentence.
``(3) Applicable program.--In this subsection, the term
`applicable program' has the meaning given the term in
section 439(b) of the General Education Provisions Act
(relating to labor standards).''.
(b) State Plan.--Section 112(b)(17)(A) of the Workforce
Investment Act of 1998 (29 U.S.C. 2822(b)(17)(A)) is
amended--
(1) in clause (iii), by striking ``and'' at the end;
(2) by redesignating clause (iv) as clause (v); and
(3) by inserting after clause (iii) the following new
clause:
``(iv) how the State will establish and carry out a
specialized program of training under section 134(f); and''.
On page 19, line 13, strike ``2007'' and insert ``2009''.
On page 26, line 19, strike ``2007'' and insert ``2009''.
On page 26, line 22, strike ``2007'' and insert ``2009''.
______
SA 619. Ms. LANDRIEU (for herself, Mr. Corzine, and Mr. Schumer)
proposed an amendment to the bill S. 1054, to provide for
reconciliation pursuant to section 201 of the concurrent resolution on
the budget for fiscal year 2004; as follows:
Strike all after the enacting clause and insert the
following
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Jobs and
Growth Reconciliation Tax Relief Act of 2003''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is
expressed in terms of an amendment to, or repeal of, a
section or other provision, the reference shall be considered
to be made to a section or other provision of the Internal
Revenue Code of 1986.
(c) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I--WAGE TAX RELIEF
Sec. 101. Refund of employee payroll taxes.
Sec. 102. Refund of employer payroll taxes on first $10,000 of wages
per employee.
TITLE II--ASSISTANCE TO STATES
Sec. 201. Temporary increase of medicaid FMAP.
Sec. 202. One-time revenue grant to States and local governments.
Sec. 203. Additional advance refundings of certain governmental bonds.
TITLE III--TAX RELIEF FOR FAMILIES
Sec. 301. Acceleration of increase in standard deduction for married
taxpayers filing joint returns.
Sec. 302. Acceleration of 15-percent individual income tax rate bracket
expansion for married taxpayers filing joint returns.
Sec. 303. Acceleration of increase in child tax credit
Sec. 304. Application of EGTRRA sunset to this title.
TITLE IV--TAX RELIEF FOR BUSINESS
Sec. 401. Increased expensing for small business.
Sec. 402. Small business tax credit for 50 percent of health premiums.
Sec. 403. Ready Reserve-National Guard employee credit added to general
business credit.
Sec. 404. Renewal community employers may qualify for employment credit
by employing residents of certain other renewal
communities.
TITLE V--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
Sec. 501. Extension of the Temporary Extended Unemployment Compensation
Act of 2002.
Sec. 502. Entitlement to additional weeks of temporary extended
unemployment compensation.
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
Sec. 511. Federal-State agreements.
Sec. 512. Payments to States having agreements under this title.
Sec. 513. Financing provisions.
Sec. 514. Definitions.
Sec. 515. Applicability.
Sec. 516. Coordination with the Temporary Extended Unemployment
Compensation Act of 2002.
Subtitle C--Railroad Unemployment Insurance
Sec. 517. Temporary increase in extended unemployment benefits under
the Railroad Unemployment Insurance Act.
TITLE VI--OTHER PROVISIONS
Subtitle A--Provisions Designed To Curtail Tax Shelters
Sec. 601. Clarification of economic substance doctrine.
Sec. 602. Penalty for failing to disclose reportable transaction.
Sec. 603. Accuracy-related penalty for listed transactions and other
reportable transactions having a significant tax
avoidance purpose.
Sec. 604. Penalty for understatements attributable to transactions
lacking economic substance, etc.
Sec. 605. Modifications of substantial understatement penalty for
nonreportable transactions.
Sec. 606. Tax shelter exception to confidentiality privileges relating
to taxpayer communications.
Sec. 607. Disclosure of reportable transactions.
Sec. 608. Modifications to penalty for failure to register tax
shelters.
Sec. 609. Modification of penalty for failure to maintain lists of
investors.
Sec. 610. Modification of actions to enjoin certain conduct related to
tax shelters and reportable transactions.
Sec. 611. Understatement of taxpayer's liability by income tax return
preparer.
Sec. 612. Penalty on failure to report interests in foreign financial
accounts.
Sec. 613. Frivolous tax submissions.
Sec. 614. Penalty on promoters of tax shelters.
Sec. 615. Statute of limitations for taxable years for which listed
transactions not reported.
Sec. 616. Denial of deduction for interest on underpayments
attributable to nondisclosed reportable and noneconomic
substance transactions.
Subtitle B--Enron-Related Tax Shelter Provisions
Sec. 621. Limitation on transfer or importation of built-in losses.
Sec. 622. No reduction of basis under section 734 in stock held by
partnership in corporate partner.
Sec. 623. Repeal of special rules for FASITS.
Sec. 624. Expanded disallowance of deduction for interest on
convertible debt.
Sec. 625. Expanded authority to disallow tax benefits under section
269.
Sec. 626. Modifications of certain rules relating to controlled foreign
corporations.
Subtitle C--Provisions to Discourage Corporate Expatriation
Sec. 631. Tax treatment of inverted corporate entities.
Sec. 632. Excise tax on stock compensation of insiders in inverted
corporations.
Sec. 633. Reinsurance of United States risks in foreign jurisdictions.
Subtitle D--Imposition of Customs User Fees
Sec. 641. Customs user fees.
TITLE VII--SUNSET
Sec. 701. Sunset.
TITLE I--WAGE TAX RELIEF
SEC. 101. REFUND OF EMPLOYEE PAYROLL TAXES.
(a) Payment of Refunds.--
(1) In general.--The Secretary of the Treasury shall pay,
out of any money in the Treasury not otherwise appropriated,
to each individual an amount equal to the lesser of--
(A) $765, or
(B) the amount of the individual's social security taxes
for 2001.
(2) Payment in installments.--The Secretary of the Treasury
shall make the payment under paragraph (1) in two equal
installments--
(A) the first of which shall be paid on the date which is 2
months after the date of the enactment of this Act, and
(B) the second of which shall be paid on December 1, 2003.
The Secretary may, after notice to the Senate and House of
Representatives, make adjustments in the timing of each
installment to the extent the adjustments are
administratively necessary.
(3) No interest.--No interest shall be allowed on any
payment required by this subsection.
[[Page S6389]]
(4) Certain individuals not eligible.--No payment shall be
made under this subsection to--
(A) any estate or trust,
(B) any nonresident alien, or
(C) any individual with respect to whom a deduction under
section 151 of such Code is allowable to another taxpayer for
a taxable year beginning in 2001.
(5) Social security taxes.--For purposes of this
subsection--
(A) In general.--The term ``social security taxes'' has the
meaning given such term by section 24(d)(2) of the Internal
Revenue Code of 1986.
(B) State and local employees not covered by social
security system.--In the case of any individual--
(i) whose service is not treated as employment by reason of
section 3121(b)(7) of such Code (relating to exemption for
State and local employees), and
(ii) who, without regard to this subparagraph, has no
social security taxes for 2001,
the term ``social security taxes'' shall include the
individual's employee contributions to a governmental pension
plan by reason of the service described in clause (i).
(b) 2002 Refund for Individuals Not Receiving Full 2001
Refund.--Subchapter B of chapter 65 (relating to abatements,
credits, and refunds) is amended by adding at the end the
following new section:
``SEC. 6429. REFUND OF CERTAIN 2002 PAYROLL TAXES.
``(a) In General.--Each eligible individual shall be
treated as having made a payment against the tax imposed by
chapter 1 for such individual's first taxable year beginning
in 2002 in an amount equal to the payroll tax refund amount
for such taxable year.
``(b) Payroll Tax Refund Amount.--For purposes of
subsection (a), the payroll tax refund amount is the excess
(if any) of--
``(1) the lesser of--
``(A) $765, or
``(B) the amount of the individual's social security taxes
for 2002, over
``(2) the amount of the payment to the individual under
section 101(a) of the Jobs and Growth Reconciliation Tax
Relief Act of 2003.
``(c) Eligible Individual.--For purposes of this section,
the term `eligible individual' means any individual other
than--
``(1) any estate or trust,
``(2) any nonresident alien, or
``(3) any individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable
year beginning in 2002.
``(d) Timing of Payments.--In the case of any overpayment
attributable to this section, the Secretary shall, subject to
the provisions of this title, refund or credit such
overpayment as rapidly as possible and, to the extent
practicable, before December 31, 2003.
``(e) No Interest.--No interest shall be allowed on any
overpayment attributable to this section.
``(f) Social Security Taxes.--For purposes of this section,
the term `social security taxes' has the meaning given such
term by section 101(a)(5) of the Jobs and Growth
Reconciliation Tax Relief Act of 2003.''
(c) Clerical Amendment.--The table of sections for
subchapter B of chapter 65 of such Code is amended by adding
at the end the following new item:
``Sec. 6429. Refund of certain 2002 payroll taxes.''
SEC. 102. REFUND OF EMPLOYER PAYROLL TAXES ON FIRST $10,000
OF WAGES PER EMPLOYEE.
(a) In General.--Subchapter B of chapter 65 (relating to
abatements, credits, and refunds), as amended by section 101,
is amended by adding at the end the following:
``SEC. 6430. REFUND OF EMPLOYER PAYROLL TAXES ON FIRST
$10,000 OF WAGES OF AN EMPLOYEE.
``(a) General Rule.--Each employer subject to tax under
section 3111 or 3221(a) with respect to employment during the
payroll tax holiday period shall be treated as having made a
payment against the tax imposed by chapter 1 for each taxable
year which includes any portion of such period in an amount
equal to the sum of the payroll tax refund amounts determined
for all employees of the employer for such taxable year.
``(b) Payroll Tax Refund Amount.--For purposes of this
section, the term `payroll tax refund amount' means, with
respect to any employee for any taxable year of an employer,
the excess (if any) of--
``(1) the lesser of--
``(A) $765, or
``(B) the amount of the employer's social security taxes
paid or incurred with respect to employment of the employee
during any portion of the payroll tax holiday period within
the taxable year, over
``(2) the amount treated as paid by the employer under this
section with respect to the employee for any preceding
taxable year.
``(c) Definitions.--For purposes of this section--
``(1) Payroll tax holiday period.--The term `payroll tax
holiday period' means the 12-month period beginning with the
first month following the date of the enactment of this
section. The Secretary may, after notice to the Senate and
House of Representatives, delay the beginning of such period
if the Secretary determines such delay is administratively
necessary to provide adequate notice of the provisions of
this section to employers and employees.
``(2) Employer payroll taxes.--
``(A) In general.--The term `employer payroll taxes' means
the taxes imposed by sections 3111 and 3221(a).
``(B) Special rule.--A rule similar to the rule of section
24(d)(2)(C) shall apply for purposes of subparagraph (A).
``(3) Employment.--The term `employment' includes services
subject to tax under chapter 22 (relating to railroad
retirement taxes).
``(d) Special Rules.--For purposes of this section--
``(1) Common control.--All employers treated as a single
employer under subsection (a) or (b) of section 52 shall be
treated as a single employer for purposes of this section.
``(2) Trade or business requirement.--This section shall
not apply to employer payroll taxes paid with respect to an
employee unless more than one-half of the employee's
remuneration is for services performed in a trade or business
of the employer. Any determination under this subparagraph
shall be made without regard to subsections (a) and (b) of
section 52.''
(b) Conforming Amendment.--The table of sections for
subchapter B of chapter 65 is amended by adding at the end
the following new item:
``Sec. 6430. Refund of employer payroll taxes on first $10,000 of wages
of an employee.''
TITLE II--ASSISTANCE TO STATES
SEC. 201. TEMPORARY INCREASE OF MEDICAID FMAP.
(a) Permitting Maintenance of Fiscal Year 2002 FMAP for
Last 2 Calendar Quarters of Fiscal Year 2003.--
Notwithstanding any other provision of law, but subject to
subsection (e), if the FMAP determined without regard to this
section for a State for fiscal year 2003 is less than the
FMAP as so determined for fiscal year 2002, the FMAP for the
State for fiscal year 2002 shall be substituted for the
State's FMAP for the third and fourth calendar quarters of
fiscal year 2003, before the application of this section.
(b) Permitting Maintenance of Fiscal Year 2003 FMAP for
Fiscal Year 2004.--Notwithstanding any other provision of
law, but subject to subsection (e), if the FMAP determined
without regard to this section for a State for fiscal year
2004 is less than the FMAP as so determined for fiscal year
2003, the FMAP for the State for fiscal year 2003 shall be
substituted for the State's FMAP for each calendar quarter of
fiscal year 2004, before the application of this section.
(c) General 2.45 Percentage Points Increase for Last 2
Calendar Quarters of Fiscal Year 2003 and Fiscal Year 2004.--
Notwithstanding any other provision of law, but subject to
subsections (e) and (f), for each State for the third and
fourth calendar quarters of fiscal year 2003 and each
calendar quarter of fiscal year 2004, the FMAP (taking into
account the application of subsections (a) and (b)) shall be
increased by 2.45 percentage points.
(d) Increase in Cap on Medicaid Payments To Territories.--
Notwithstanding any other provision of law, but subject to
subsection (f), with respect to the third and fourth calendar
quarters of fiscal year 2003 and each calendar quarter of
fiscal year 2004, the amounts otherwise determined for Puerto
Rico, the Virgin Islands, Guam, the Northern Mariana Islands,
and American Samoa under subsections (f) and (g) of section
1108 of the Social Security Act (42 U.S.C. 1308) shall each
be increased by an amount equal to 4.90 percent of such
amounts.
(e) Scope of Application.--The increases in the FMAP for a
State under this section shall apply only for purposes of
title XIX of the Social Security Act and shall not apply with
respect to--
(1) disproportionate share hospital payments described in
section 1923 of such Act (42 U.S.C. 1396r-4); or
(2) payments under title IV or XXI of such Act (42 U.S.C.
601 et seq. and 1397aa et seq.).
(f) State Eligibility.--
(1) In general.--Subject to paragraph (2), a State is
eligible for an increase in its FMAP under subsection (c) or
an increase in a cap amount under subsection (d) only if the
eligibility under its State plan under title XIX of the
Social Security Act (including any waiver under such title or
under section 1115 of such Act (42 U.S.C. 1315)) is no more
restrictive than the eligibility under such plan (or waiver)
as in effect on September 2, 2003.
(2) State reinstatement of eligibility permitted.--A State
that has restricted eligibility under its State plan under
title XIX of the Social Security Act (including any waiver
under such title or under section 1115 of such Act (42 U.S.C.
1315)) after September 2, 2003, but prior to the date of
enactment of this Act is eligible for an increase in its FMAP
under subsection (c) or an increase in a cap amount under
subsection (d) in the first calendar quarter (and subsequent
calendar quarters) in which the State has reinstated
eligibility that is no more restrictive than the eligibility
under such plan (or waiver) as in effect on September 2,
2003.
(3) Rule of construction.--Nothing in paragraph (1) or (2)
shall be construed as affecting a State's flexibility with
respect to benefits offered under the State medicaid program
under title XIX of the Social Security Act (42 U.S.C. 1396 et
seq.) (including any waiver under such title or under section
1115 of such Act (42 U.S.C. 1315)).
(g) Definitions.--In this section:
(1) FMAP.--The term ``FMAP'' means the Federal medical
assistance percentage, as
[[Page S6390]]
defined in section 1905(b) of the Social Security Act (42
U.S.C. 1396d(b)).
(2) State.--The term ``State'' has the meaning given such
term for purposes of title XIX of the Social Security Act (42
U.S.C. 1396 et seq.).
(h) Repeal.--Effective as of October 1, 2004, this section
is repealed.
SEC. 202. ONE-TIME REVENUE GRANT TO STATES AND LOCAL
GOVERNMENTS.
(a) Appropriation.--There is authorized to be appropriated
and is appropriated to carry out this section $30,000,000,000
for fiscal year 2003.
(b) Payments to States.--
(1) In general.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, pay with respect to a State, the sum
of the amounts determined for the State under paragraphs (2),
(3), and (4).
(2) Funding to meet the requirements of the no child left
behind act.--$7,500,000,000 shall be paid to States in the
same manner as allocations are made with respect to States
under section 1122 of the Elementary and Secondary Education
Act of 1965 (20 U.S.C. 6332).
(3) Funding for child care for low-income families.--
$3,000,000,000 shall be paid to States in the same manner as
allocations are made with respect to States under section
658O of the Child Care and Development Block Grant Act of
1990 (42 U.S.C. 9858m).
(4) Funding for other state priorities.--
(A) 50 percent based on population.--$4,875,000,000 shall
be allotted among such States on the basis of the relative
population of each such State, as determined by the Secretary
on the basis of the most recent satisfactory data.
(B) 50 percent based on change in unemployment rate.--
(i) Tier 1.--$1,220,000,000 shall be allotted among such
States which have experienced a tier 1 unemployment rate on
the basis of the relative number of unemployed individuals
for calendar year 2002 in each such State, as determined by
the Secretary on the basis of the most recent satisfactory
data.
(ii) Tier 2.--$3,655,000,000 shall be allotted among such
States which have experienced a tier 2 unemployment rate on
the basis of the relative number of unemployed individuals
for calendar year 2002 in each such State, as determined by
the Secretary on the basis of the most recent satisfactory
data.
(C) Guidelines for Use of Funds.--It is the sense of
Congress that States should use funds paid under this
paragraph for homeland security, public health, highway
construction, and the prevention of additional property and
other tax increases.
(c) Payments to Units of General Local Government.--
(1) In general.--From the amount appropriated under
subsection (a) for fiscal year 2003, the Secretary of the
Treasury shall, as soon as practicable after the date of the
enactment of this Act, pay with respect to a unit of general
local government, the sum of the amounts determined for the
unit of general local government under paragraphs (2) and
(3).
(2) percent based on population.--$4,875,000,000 shall be
allotted among such States as determined under subsection
(b)(4)(A) for distribution to the various units of general
local government within such States on the basis of the
relative population of each such unit within each such State,
as determined by the Secretary on the basis of the most
recent satisfactory data.
(3) 50 percent based on change in unemployment rate.--
(i) Tier 1.--$1,220,000,000 shall be allotted among such
States which have experienced a tier 1 unemployment rate as
determined under subsection (b)(4)(B)(i) for distribution to
the various units of general local government within such
States on the basis of the relative number of unemployed
individuals for calendar year 2002 in each such unit within
each such State, as determined by the Secretary on the basis
of the most recent satisfactory data.
(ii) Tier 2.--$3,655,000,000 shall be allotted among such
States which have experienced a tier 2 unemployment rate as
determined under subsection (b)(4)(B)(ii) for distribution to
the various units of general local government within such
States on the basis of the relative number of unemployed
individuals for calendar year 2002 in each such unit within
each such State, as determined by the Secretary on the basis
of the most recent satisfactory data.
(4) Guidelines for Use of Funds.--It is the sense of
Congress that units of general local government should use
funds paid in accordance with this subsection for homeland
security, public health, highway construction, and the
prevention of additional property and other tax increases.
(d) Definitions.--For purposes of this section--
(1) State.--The term ``State'' means any of the several
States, the District of Columbia, and the Commonwealth of
Puerto Rico.
(2) Unit of general local government.--
(A) In general.--The term ``unit of general local
government'' means--
(i) a county, parish, township, city, or political
subdivision of a county, parish, township, or city, that is a
unit of general local government as determined by the
Secretary of Commerce for general statistical purposes; and
(ii) the District of Columbia, the Commonwealth of Puerto
Rico, and the recognized governing body of an Indian tribe or
Alaskan native village that carries out substantial
governmental duties and powers.
(B) Treatment of subsumed areas.--For purposes of
determining a unit of general local government under this
section, the rules under section 6720(c) of title 31, United
States Code, shall apply.
(3) Unemployment.--With respect to any State or unit of
general local government--
(A) Tier 1 unemployment rate.--The term ``tier 1
unemployment rate'' means an unemployment rate for calendar
year 2002 which was at least .4 but not more than 1.0
percentage point greater than such rate for calendar year
2000.
(B) Tier 2 unemployment rate.--The term ``tier 2
unemployment rate'' means an unemployment rate for calendar
year 2002 which was more than 1.0 percentage point greater
than such rate for calendar year 2000.
SEC. 203. ADDITIONAL ADVANCE REFUNDINGS OF CERTAIN
GOVERNMENTAL BONDS.
(a) In General.--Section 149(d)(3)(A)(i) (relating to
advance refundings of other bonds) is amended--
(1) by striking ``or'' at the end of subclause (I),
(2) by adding ``or'' at the end of subclause (II), and
(3) by inserting after subclause (II) the following:
``(III) the 2nd advance refunding of the original bond if
the original bond was issued after 1985 or the 3rd advance
refunding of the original bond if the original bond was
issued before 1986, if, in either case, the refunding bond is
issued before the date which is 2 years after the date of the
enactment of this subclause and the original bond was issued
as part of an issue 90 percent or more of the net proceeds of
which were used to finance governmental facilities used for 1
or more essential governmental functions (within the meaning
of section 141(c)(2)),''.
(b) Effective Date.--The amendments made by this section
shall apply to refunding bonds issued on or after the date of
the enactment of this Act.
TITLE III--TAX RELIEF FOR FAMILIES
SEC. 301. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR
MARRIED TAXPAYERS FILING JOINT RETURNS.
(a) In General.--Paragraph (2) of section 63(c) (relating
to basic standard deduction) is amended to read as follows:
``(2) Basic standard deduction.--For purposes of paragraph
(1), the basic standard deduction is--
``(A) 200 percent of the dollar amount in effect under
subparagraph (C) for the taxable year in the case of--
``(i) a joint return, or
``(ii) a surviving spouse (as defined in section 2(a)),
``(B) $4,400 in the case of a head of household (as defined
in section 2(b)), or
``(C) $3,000 in any other case.''.
(b) Conforming Amendments.--
(1) Section 63(c)(4) is amended by striking ``(2)(D)'' each
place it occurs and inserting ``(2)(C)''.
(2) Section 63(c) is amended by striking paragraph (7).
(3) Section 301(d) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 302. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX
RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS
FILING JOINT RETURNS.
(a) In General.--Paragraph (8) of section 1(f ) (relating
to phaseout of marriage penalty in 15-percent bracket) is
amended to read as follows:
``(8) Elimination of marriage penalty in 15-percent
bracket.--With respect to taxable years beginning after
December 31, 2002, in prescribing the tables under paragraph
(1)--
``(A) the maximum taxable income in the 15 percent rate
bracket in the table contained in subsection (a) (and the
minimum taxable income in the next higher taxable income
bracket in such table) shall be 200 percent of the maximum
taxable income in the 15-percent rate bracket in the table
contained in subsection (c) (after any other adjustment under
this subsection), and
``(B) the comparable taxable income amounts in the table
contained in subsection (d) shall be \1/2\ of the amounts
determined under subparagraph (A).''.
(b) Conforming Amendments.--
(1) The heading for subsection (f ) of section 1 is amended
by striking ``Phaseout'' and inserting ``Elimination''.
(2) Section 302(c) of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by striking ``2004''
and inserting ``2002''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 303. ACCELERATION OF INCREASE IN CHILD TAX CREDIT
(a) In General.--The table contained in section 24(a)(2)
(relating to per child amount) is amended to read as follows:
``In the case of any taxable year beginning The per child amount is--
2003, 2004, or 2005........................................ 800 ....
2006 or thereafter......................................1,000.''.....
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2002.
[[Page S6391]]
SEC. 304. APPLICATION OF EGTRRA SUNSET TO THIS TITLE.
Each amendment made by this title shall be subject to title
IX of the Economic Growth and Tax Relief Reconciliation Act
of 2001 to the same extent and in the same manner as the
provision of such Act to which such amendment relates.
TITLE IV--TAX RELIEF FOR BUSINESS
SEC. 401. INCREASED EXPENSING FOR SMALL BUSINESS.
(a) In General.--Paragraph (1) of section 179(b) (relating
to dollar limitation) is amended to read as follows:
``(1) Dollar limitation.--The aggregate cost which may be
taken into account under subsection (a) for any taxable year
shall not exceed $25,000 ($100,000 in the case of taxable
years beginning after 2002 and before 2008).''.
(b) Increase in Qualifying Investment at Which Phaseout
Begins.--Paragraph (2) of section 179(b) (relating to
reduction in limitation) is amended by inserting ``($400,000
in the case of taxable years beginning after 2002 and before
2008)'' after ``$200,000''.
(c) Off-the-Shelf Computer Software.--Paragraph (1) of
section 179(d) (defining section 179 property) is amended to
read as follows:
``(1) Section 179 property.--For purposes of this section,
the term `section 179 property' means property--
``(A) which is--
``(i) tangible property (to which section 168 applies), or
``(ii) computer software (as defined in section
197(e)(3)(B)) which is described in section 197(e)(3)(A)(i),
to which section 167 applies, and which is placed in service
in a taxable year beginning after 2002 and before 2008,
``(B) which is section 1245 property (as defined in section
1245(a)(3)), and
``(C) which is acquired by purchase for use in the active
conduct of a trade or business.
Such term shall not include any property described in section
50(b) and shall not include air conditioning or heating
units.''.
(d) Adjustment of Dollar Limit and Phaseout Threshold for
Inflation.--Subsection (b) of section 179 (relating to
limitations) is amended by adding at the end the following
new paragraph:
``(5) Inflation adjustments.--
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2003 and before 2008, the
$100,000 and $400,000 amounts in paragraphs (1) and (2) shall
each be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, by substituting `calendar year 2002' for
`calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--
``(i) Dollar limitation.--If the amount in paragraph (1) as
increased under subparagraph (A) is not a multiple of $1,000,
such amount shall be rounded to the nearest multiple of
$1,000.
``(ii) Phaseout amount.--If the amount in paragraph (2) as
increased under subparagraph (A) is not a multiple of
$10,000, such amount shall be rounded to the nearest multiple
of $10,000.''.
(e) Revocation of Election.--Paragraph (2) of section
179(c) (relating to election irrevocable) is amended to read
as follows:
``(2) Revocation of election.--An election under paragraph
(1) with respect to any taxable year beginning after 2002 and
before 2008, and any specification contained in any such
election, may be revoked by the taxpayer with respect to any
property. Such revocation, once made, shall be
irrevocable.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
SEC. 402. SMALL BUSINESS TAX CREDIT FOR 50 PERCENT OF HEALTH
PREMIUMS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business-related credits) is amended
by adding at the end the following:
``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the
case of a qualified small employer, the employee health
insurance expenses credit determined under this section is an
amount equal to the applicable percentage of the amount paid
by the taxpayer during the taxable year for qualified
employee health insurance expenses.
``(b) Applicable Percentage.--For purposes of subsection
(a), the applicable percentage is equal to--
``(1) 50 percent in the case of an employer with less than
26 qualified employees,
``(2) 40 percent in the case of an employer with more than
25 but less than 36 qualified employees, and
``(3) 30 percent in the case of an employer with more than
35 but less than 51 qualified employees.
``(c) Per Employee Dollar Limitation.--The amount of
qualified employee health insurance expenses taken into
account under subsection (a) with respect to any qualified
employee for any taxable year shall not exceed the maximum
employer contribution for self-only coverage or family
coverage (as applicable) determined under section 8906(a) of
title 5, United States Code, for the calendar year in which
such taxable year begins.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small employer'
means any small employer which provides eligibility for
health insurance coverage (after any waiting period (as
defined in section 9801(b)(4)) to all qualified employees of
the employer.
``(B) Small employer.--
``(i) In general.--For purposes of this paragraph, the term
`small employer' means, with respect to any calendar year,
any employer if such employer employed an average of not less
than 2 and not more than 50 qualified employees on business
days during either of the 2 preceding calendar years. For
purposes of the preceding sentence, a preceding calendar year
may be taken into account only if the employer was in
existence throughout such year.
``(ii) Employers not in existence in preceding year.--In
the case of an employer which was not in existence throughout
the 1st preceding calendar year, the determination under
clause (i) shall be based on the average number of qualified
employees that it is reasonably expected such employer will
employ on business days in the current calendar year.
``(2) Qualified employee health insurance expenses.--
``(A) In general.--The term `qualified employee health
insurance expenses' means any amount paid by an employer for
health insurance coverage to the extent such amount is
attributable to coverage provided to any employee while such
employee is a qualified employee.
``(B) Exception for amounts paid under salary reduction
arrangements.--No amount paid or incurred for health
insurance coverage pursuant to a salary reduction arrangement
shall be taken into account under subparagraph (A).
``(C) Health insurance coverage.--The term `health
insurance coverage' has the meaning given such term by
paragraph (1) of section 9832(b) (determined by disregarding
the last sentence of paragraph (2) of such section).
``(3) Qualified employee.--The term `qualified employee'
means an employee of an employer who, with respect to any
period, is not provided health insurance coverage under--
``(A) a health plan of the employee's spouse,
``(B) title XVIII, XIX, or XXI of the Social Security Act,
``(C) chapter 17 of title 38, United States Code,
``(D) chapter 55 of title 10, United States Code,
``(E) chapter 89 of title 5, United States Code, or
``(F) any other provision of law.
``(4) Employee--.The term `employee'--
``(A) means any individual, with respect to any calendar
year, who is reasonably expected to receive at least $5,000
of compensation from the employer during such year,
``(B) does not include an employee within the meaning of
section 401(c)(1), and
``(C) includes a leased employee within the meaning of
section 414(n).
``(5) Compensation.--The term `compensation' means amounts
described in section 6051(a)(3).
``(e) Certain Rules Made Applicable.--For purposes of this
section, rules similar to the rules of section 52 shall
apply.
``(f) Denial of Double Benefit.--No deduction or credit
under any other provision of this chapter shall be allowed
with respect to qualified employee health insurance expenses
taken into account under subsection (a).
``(g) Termination.--This section shall not apply to taxable
years beginning after December 31, 2003.''.
(b) Credit To Be Part of General Business Credit.--Section
38(b) (relating to current year business credit) is amended
by striking ``plus'' at the end of paragraph (14), by
striking the period at the end of paragraph (15) and
inserting ``, plus'', and by adding at the end the following:
``(16) the employee health insurance expenses credit
determined under section 45G.''.
(c) Credit Allowed Against Minimum Tax.--
(1) In general.--Subsection (c) of section 38 (relating to
limitation based on amount of tax) is amended by
redesignating paragraph (3) as paragraph (4) and by inserting
after paragraph (2) the following new paragraph:
``(3) Special rules for employee health insurance credit.--
``(A) In general.--In the case of the employee health
insurance credit--
``(i) this section and section 39 shall be applied
separately with respect to the credit, and
``(ii) in applying paragraph (1) to the credit--
``(I) the amounts in subparagraphs (A) and (B) thereof
shall be treated as being zero, and
``(II) the limitation under paragraph (1) (as modified by
subclause (I)) shall be reduced by the credit allowed under
subsection (a) for the taxable year (other than the employee
health insurance credit).
``(B) Employee health insurance credit.--For purposes of
this subsection, the term `employee health insurance credit'
means the credit allowable under subsection (a) by reason of
section 45G(a).''.
(2) Conforming amendment.--Subclause (II) of section
38(c)(2)(A)(ii) is amended by striking ``(other'' and all
that follows through ``credit)'' and inserting ``(other than
the empowerment zone employment credit or the employee health
insurance credit)''.
[[Page S6392]]
(d) No Carrybacks.--Subsection (d) of section 39 (relating
to carryback and carryforward of unused credits) is amended
by adding at the end the following:
``(11) No carryback of section 45g credit before effective
date.--No portion of the unused business credit for any
taxable year which is attributable to the employee health
insurance expenses credit determined under section 45G may be
carried back to a taxable year ending before the date of the
enactment of section 45G.''.
(e) Clerical Amendment.--The table of sections for subpart
D of part IV of subchapter A of chapter 1 is amended by
adding at the end the following:
``Sec. 45G. Employee health insurance expenses.''.
(f) Employer Outreach.--The Internal Revenue Service shall,
in conjunction with the Small Business Administration,
develop materials and implement an educational program to
ensure that business personnel are aware of--
(1) the eligibility criteria for the tax credit provided
under section 45G of the Internal Revenue Code of 1986 (as
added by this section),
(2) the methods to be used in calculating such credit,
(3) the documentation needed in order to claim such credit,
and
(4) any available health plan purchasing alliances
established under title II,
so that the maximum number of eligible businesses may claim
the tax credit.
(g) Effective Date.--The amendments made by this section
shall apply to amounts paid or incurred in taxable years
beginning after December 31, 2002.
SEC. 403. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED
TO GENERAL BUSINESS CREDIT.
(a) Ready Reserve-National Guard Credit.--Subpart D of part
IV of subchapter A of chapter 1 (relating to business-related
credits), as amended by section 402, is amended by adding at
the end the following:
``SEC. 45H. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.
``(a) General Rule.--For purposes of section 38, the Ready
Reserve-National Guard employee credit determined under this
section for any taxable year is an amount equal to 50 percent
of the actual compensation amount for such taxable year.
``(b) Definition of Actual Compensation Amount.--For
purposes of this section, the term `actual compensation
amount' means the amount of compensation paid or incurred by
an employer with respect to a Ready Reserve-National Guard
employee on any day during a taxable year when the employee
was absent from employment for the purpose of performing
qualified active duty.
``(c) Limitations.--
``(1) Maximum period for credit per employee.--The maximum
period with respect to which the credit may be allowed with
respect to any Ready Reserve-National Guard employee shall
not exceed the 12-month period beginning on the first day
such credit is so allowed with respect to such employee.
``(2) Days other than work days.--No credit shall be
allowed with respect to a Ready Reserve-National Guard
employee who performs qualified active duty on any day on
which the employee was not scheduled to work (for reason
other than to participate in qualified active duty).
``(d) Definitions.--For purposes of this section--
``(1) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty, other than the training duty specified
in section 10147 of title 10, United States Code (relating to
training requirements for the Ready Reserve), or section
502(a) of title 32, United States Code (relating to required
drills and field exercises for the National Guard), in
connection with which an employee is entitled to reemployment
rights and other benefits or to a leave of absence from
employment under chapter 43 of title 38, United States Code,
and
``(B) hospitalization incident to such duty.
``(2) Compensation.--The term `compensation' means any
remuneration for employment, whether in cash or in kind,
which is paid or incurred by a taxpayer and which is
deductible from the taxpayer's gross income under section
162(a)(1).
``(3) Ready reserve-national guard employee.--The term
`Ready Reserve-National Guard employee' means an employee who
is a member of the Ready Reserve or of the National Guard.
``(4) National guard.--The term `National Guard' has the
meaning given such term by section 101(c)(1) of title 10,
United States Code.
``(5) Ready reserve.--The term `Ready Reserve' has the
meaning given such term by section 10142 of title 10, United
States Code.''.
(b) Credit To Be Part of General Business Credit.--
Subsection (b) of section 38 (relating to general business
credit), as amended by section 403, is amended by striking
``plus'' at the end of paragraph (15), by striking the period
at the end of paragraph (16) and inserting ``, plus'', and by
adding at the end the following:
``(17) the Ready Reserve-National Guard employee credit
determined under section 45H(a).''.
(c) Conforming Amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1, as amended
by section 403, is amended by adding at the end the
following:
``Sec. 45H. Ready Reserve-National Guard employee credit.''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 404. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR
EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF
CERTAIN OTHER RENEWAL COMMUNITIES.
(a) In General.--Section 1400H(b)(2) (relating to
modification) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) subsection (d)(1)(B) thereof shall be applied by
substituting `such renewal community, an adjacent renewal
community within the same State as such renewal community, or
a renewal community within such State which is within 5 miles
of any border of such renewal community' for `such
empowerment zone'.''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the amendment made by
section 101(a) of the Community Renewal Tax Relief Act of
2000.
TITLE V--UNEMPLOYMENT COMPENSATION
Subtitle A--Extension and Enhancement of Temporary Extended
Unemployment Compensation
SEC. 501. EXTENSION OF THE TEMPORARY EXTENDED UNEMPLOYMENT
COMPENSATION ACT OF 2002.
(a) In General.--Section 208 of the Temporary Extended
Unemployment Compensation Act of 2002 (Public Law 107-147;
116 Stat. 30), as amended by Public Law 108-1 (117 Stat. 3),
is amended--
(1) in subsection (a)(2), by striking ``before June 1'' and
inserting ``on or before November 30'';
(2) in subsection (b)(1), by striking ``May 31, 2003'' and
inserting ``November 30, 2003'';
(3) in subsection (b)(2)--
(A) in the heading, by striking ``may 31, 2003'' and
inserting ``november 30, 2003''; and
(B) by striking ``May 31, 2003'' and inserting ``November
30, 2003''; and
(4) in subsection (b)(3), by striking ``August 30, 2003''
and inserting ``February 28, 2004''.
(b) Effective Date.--The amendments made by this section
shall take effect as if included in the enactment of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 21).
SEC. 502. ENTITLEMENT TO ADDITIONAL WEEKS OF TEMPORARY
EXTENDED UNEMPLOYMENT COMPENSATION.
(a) Entitlement to Additional Weeks.--
(1) In general.--Paragraph (1) of section 203(b) of the
Temporary Extended Unemployment Compensation Act of 2002
(Public Law 107-147; 116 Stat. 28) is amended--
(A) in subparagraph (A), by striking ``50 percent'' and
inserting ``100 percent''; and
(B) in subparagraph (B), by striking ``13 times'' and
inserting ``26 times''.
(2) Repeal of restriction on augmentation during
transitional period.--Section 208(b) of the Temporary
Extended Unemployment Compensation Act of 2002 (Public Law
107-147), as amended by Public Law 108-1 (117 Stat. 3) and
section 301(a), is amended--
(A) in paragraph (1)--
(i) by striking ``paragraphs (2) and (3)'' and inserting
``paragraph (2)''; and
(ii) by inserting before the period at the end the
following: ``, including such compensation payable by reason
of amounts deposited in such account after such date pursuant
to the application of subsection (c) of such section'';
(B) by striking paragraph (2); and
(C) by redesignating paragraph (3) as paragraph (2).
(3) Extension of transition limitation.--Section 208(b)(2)
of the Temporary Extended Unemployment Compensation Act of
2002 (Public Law 107-147), as amended by Public Law 108-1
(117 Stat. 3) and section 301(a)(4) and as redesignated by
paragraph (2), is amended by striking ``February 28, 2004''
and inserting ``May 29, 2004''.
(4) Conforming amendment for augmented benefits.--Section
203(c)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended by
striking ``the amount originally established in such account
(as determined under subsection (b)(1))'' and inserting ``7
times the individual's average weekly benefit amount for the
benefit year''.
(b) Effective Date and Application.--
(1) In general.--The amendments made by subsection (a)
shall apply with respect to weeks of unemployment beginning
on or after the date of enactment this Act.
(2) TEUC-X amounts deposited in account prior to date of
enactment deemed to be the additional teuc amounts provided
by this section.--In applying the amendments made by
subsection (a) under the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 26),
the Secretary of Labor shall deem any amounts deposited into
an individual's temporary extended unemployment compensation
account by reason of section 203(c) of such Act (commonly
known as ``TEUC-X amounts'') prior to the date of enactment
of this Act to be amounts deposited in such account by reason
of section 203(b) of such Act, as amended by subsection (a)
(commonly known as ``TEUC amounts'').
[[Page S6393]]
(3) Application to exhaustees and current beneficiaries.--
(A) Exhaustees.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) who exhausted such individual's rights to such
compensation (by reason of the payment of all amounts in such
individual's temporary extended unemployment compensation
account) before such date,
such individual's eligibility for any additional weeks of
temporary extended unemployment compensation by reason of the
amendments made by subsection (a) shall apply with respect to
weeks of unemployment beginning on or after the date of
enactment of this Act.
(B) Current beneficiaries.--In the case of any individual--
(i) to whom any temporary extended unemployment
compensation was payable for any week beginning before the
date of enactment of this Act; and
(ii) as to whom the condition described in subparagraph
(A)(ii) does not apply,
such individual shall be eligible for temporary extended
unemployment compensation (in accordance with the provisions
of the Temporary Extended Unemployment Compensation Act of
2002, as amended by subsection (a)) with respect to weeks of
unemployment beginning on or after the date of enactment of
this Act.
(4) Redetermination of eligibility for augmented amounts
for individuals for whom such a determination was made prior
to the date of enactment.--Any determination of whether the
individual's State is in an extended benefit period under
section 203(c) of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 28)
made prior to the date of enactment of this Act shall be
disregarded and the determination under such section shall be
made as follows:
(A) Individuals who exhausted all teuc and teuc-x amounts
prior to the date of enactment.--In the case of an individual
whose temporary extended unemployment account has, prior to
the date of enactment of this Act, been both augmented under
such section 203(c) and exhausted of all amounts by which it
was so augmented, the determination shall be made as of such
date of enactment.
(B) All other individuals.--In the case of an individual
who is not described in subparagraph (A), the determination
shall be made at the time that the individual's account
established under such section 203, as amended by subsection
(a), is exhausted.
(5) No effect on provisions related to displaced airline
related workers.--The amendments made by this section and
section 301 shall have no effect on the provisions of section
4002 of the Emergency Wartime Supplemental Appropriations
Act, 2003 (Public Law 108-11).
Subtitle B--Temporary Enhanced Regular Unemployment Compensation
SEC. 511. FEDERAL-STATE AGREEMENTS.
(a) In General.--Any State which desires to do so may enter
into and participate in an agreement under this title with
the Secretary of Labor (in this title referred to as the
``Secretary''). Any State which is a party to an agreement
under this title may, upon providing 30 days' written notice
to the Secretary, terminate such agreement.
(b) Provisions of Agreement.--
(1) In general.--Subject to paragraph (3), any agreement
under subsection (a) shall provide that the State agency of
the State, in addition to any amounts of regular compensation
to which an individual may be entitled under the State law,
shall make payments of temporary enhanced regular
unemployment compensation to an individual in an amount and
to the extent that the individual would be entitled to
regular compensation if the State law were applied with the
modifications described in paragraph (2).
(2) Modifications described.--The modifications described
in this paragraph are as follows:
(A) In the case of an individual who is not eligible for
regular compensation under the State law because of the use
of a definition of base period that does not count wages
earned in the most recently completed calendar quarter, then
eligibility for compensation shall be determined by applying
a base period ending at the close of the most recently
completed calendar quarter.
(B) In the case of an individual who is not eligible for
regular compensation under the State law because such
individual does not meet requirements relating to
availability for work, active search for work, or refusal to
accept work, because such individual is seeking, or is
available for, less than full-time work, then compensation
shall not be denied by such State to an otherwise eligible
individual who seeks less than full-time work or fails to
accept full-time work.
(3) Reduction of amounts of regular compensation available
for individuals who sought part-time work or failed to accept
full-time work.--Any agreement under subsection (a) shall
provide that the State agency of the State shall reduce the
amount of regular compensation available to an individual who
has received temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in paragraph (2)(B) by the amount of
such temporary enhanced regular unemployment compensation.
(c) Coordination Rule.--The modifications described in
subsection (b)(2) shall also apply in determining the amount
of benefits payable under any Federal law to the extent that
those benefits are determined by reference to regular
compensation payable under the State law of the State
involved.
SEC. 512. PAYMENTS TO STATES HAVING AGREEMENTS UNDER THIS
TITLE.
(a) General Rule.--There shall be paid to each State which
has entered into an agreement under this title an amount
equal to--
(1) 100 percent of any temporary enhanced regular
unemployment compensation; and
(2) 100 percent of any regular compensation which is paid
to individuals by such State by reason of the fact that its
State law contains provisions comparable to the modifications
described in subparagraphs (A) and (B) of section 311(b)(2),
but only to the extent that those amounts would, if such
amounts were instead payable by virtue of the State law's
being deemed to be so modified pursuant to section 311(b)(1),
have been reimbursable under paragraph (1).
(b) Determination of Amount.--Sums under subsection (a)
payable to any State by reason of such State having an
agreement under this title shall be payable, either in
advance or by way of reimbursement (as may be determined by
the Secretary), in such amounts as the Secretary estimates
the State will be entitled to receive under this title for
each calendar month, reduced or increased, as the case may
be, by any amount by which the Secretary finds that the
Secretary's estimates for any prior calendar month were
greater or less than the amounts which should have been paid
to the State. Such estimates may be made on the basis of such
statistical, sampling, or other method as may be agreed upon
by the Secretary and the State agency of the State involved.
SEC. 513. FINANCING PROVISIONS.
(a) In General.--Funds in the extended unemployment
compensation account (as established by section 905(a) of the
Social Security Act (42 U.S.C. 1105(a))), and the Federal
unemployment account (as established by section 904(g) of
such Act (42 U.S.C. 1104(g))), of the Unemployment Trust Fund
(as established by section 904(a) of such Act (42 U.S.C.
1104(a))) shall be used for the making of payments to States
having agreements entered into under this title.
(b) Certification.--The Secretary shall from time to time
certify to the Secretary of the Treasury for payment to each
State the sums which are payable to such State under this
title. The Secretary of the Treasury, prior to audit or
settlement by the General Accounting Office, shall make
payments to the State in accordance with such certification
by transfers from the extended unemployment compensation
account (as so established), or, to the extent that there are
insufficient funds in that account, from the Federal
unemployment account, to the account of such State in the
Unemployment Trust Fund (as so established).
(c) Assistance to States.--There are appropriated out of
the employment security administration account of the
Unemployment Trust Fund (as established by section 901(a) of
the Social Security Act (42 U.S.C. 1101(a))) $500,000,000 to
reimburse States for the costs of the administration of
agreements under this title (including any improvements in
technology in connection therewith) and to provide
reemployment services to unemployment compensation claimants
in States having agreements under this title. Each State's
share of the amount appropriated by the preceding sentence
shall be determined by the Secretary according to the factors
described in section 302(a) of the Social Security Act (42
U.S.C. 502(a)) and certified by the Secretary to the
Secretary of the Treasury.
(d) Appropriations for Certain Payments.--There are
appropriated from the general fund of the Treasury, without
fiscal year limitation, to the extended unemployment
compensation account (as so established) of the Unemployment
Trust Fund (as so established) such sums as the Secretary
estimates to be necessary to make the payments under this
section in respect of--
(1) compensation payable under chapter 85 of title 5,
United States Code; and
(2) compensation payable on the basis of services to which
section 3309(a)(1) of the Internal Revenue Code of 1986
applies.
Amounts appropriated pursuant to the preceding sentence shall
not be required to be repaid.
SEC. 514. DEFINITIONS.
For purposes of this title, the terms ``compensation'',
``base period'', ``regular compensation'', ``State'', ``State
agency'', ``State law'', and ``week'' have the respective
meanings given such terms under section 205 of the Federal-
State Extended Unemployment Compensation Act of 1970.
SEC. 515. APPLICABILITY.
(a) In General.--Except as provided in subsection (b), an
agreement entered into under this title shall apply to weeks
of unemployment--
(1) beginning after the date on which such agreement is
entered into; and
(2) ending before July 1, 2004.
(b) Phase-Out of TERUC.--
(1) In general.--Subject to paragraph (2), in the case of
an individual who has established eligibility for temporary
enhanced regular unemployment compensation, but who has not
exhausted all rights to such compensation, as of the last day
of the week ending before July 1, 2004, such compensation
shall continue to be payable to such individual for any week
beginning after such
[[Page S6394]]
date for which the individual meets the eligibility
requirements of this title.
(2) Limitation.--No compensation shall be payable by reason
of paragraph (1) for any week beginning after December 31,
2004.
SEC. 516. COORDINATION WITH THE TEMPORARY EXTENDED
UNEMPLOYMENT COMPENSATION ACT OF 2002.
(a) In General.--The Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended--
(1) in section 202(b)(1), by inserting ``, and who have
exhausted all rights to temporary enhanced regular
unemployment compensation'' before the semicolon at the end;
(2) in section 202(b)(2), by inserting ``, temporary
enhanced regular unemployment compensation,'' after ``regular
compensation'';
(3) in section 202(c), by inserting ``(or, as the case may
be, such individual's rights to temporary enhanced regular
unemployment compensation)'' after ``State law'' in the
matter preceding paragraph (1);
(4) in section 202(c)(1), by inserting ``and no payments of
temporary enhanced regular unemployment compensation can be
made'' after ``under such law'';
(5) in section 202(d)(1), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
(including dependents' allowances) payable to such individual
for such a week,'' after ``total unemployment'';
(6) in section 202(d)(2)(A), by inserting ``, or, as the
case may be, to temporary enhanced regular unemployment
compensation,'' after ``State law'';
(7) in section 203(b)(1)(A), by inserting ``plus the amount
of any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``under
such law''; and
(8) in section 203(b)(2), by inserting ``or the amount of
any temporary enhanced regular unemployment compensation
payable to such individual for such week,'' after ``total
unemployment''.
(b) Amount of TEUC Offset by Amount of TERUC.--Section
203(b)(1) of the Temporary Extended Unemployment Compensation
Act of 2002 (Public Law 107-147; 116 Stat. 28) is amended--
(1) in subparagraph (B), by striking the period at the end
and inserting a comma; and
(2) by adding at the end the following:
``minus the number of weeks in which the individual was
entitled to temporary enhanced regular unemployment
compensation as a result of the application of the
modification described in section 511(b)(2)(A) of the Jobs
and Growth Reconciliation Tax Relief Act of 2003 (relating to
the alternative base period) multiplied by the individual's
average weekly benefit amount for the benefit year.''.
(c) Temporary Enhanced Regular Unemployment Compensation
Defined.--Section 207 of the Temporary Extended Unemployment
Compensation Act of 2002 (Public Law 107-147; 116 Stat. 30)
is amended to read as follows:
``SEC. 207. DEFINITIONS.
``In this title:
``(1) General definitions.--The terms `compensation',
`regular compensation', `extended compensation', `additional
compensation', `benefit year', `base period', `State', `State
agency', `State law', and `week' have the respective meanings
given such terms under section 205 of the Federal-State
Extended Unemployment Compensation Act of 1970 (26 U.S.C.
3304 note).
``(2) Temporary enhanced regular unemployment
compensation.--The term `temporary enhanced regular
unemployment compensation' means temporary enhanced regular
unemployment benefits payable under title V of the Jobs and
Growth Reconciliation Tax Relief Act of 2003.''.
Subtitle C--Railroad Unemployment Insurance
SEC. 517. TEMPORARY INCREASE IN EXTENDED UNEMPLOYMENT
BENEFITS UNDER THE RAILROAD UNEMPLOYMENT
INSURANCE ACT.
Section 2(c)(2) of the Railroad Unemployment Insurance Act
(45 U.S.C. 352(c)(2)) is amended by adding at the end the
following:
``(D) Temporary increase in extended unemployment
benefits.--
``(i) Employees with 10 or more years of service.--Subject
to clause (iii), in the case of an employee who has 10 or
more years of service (as so defined), with respect to
extended unemployment benefits--
``(I) subparagraph (A) shall be applied by substituting
``130 days of unemployment'' for ``65 days of unemployment'';
and
``(II) subparagraph (B) shall be applied by inserting
``(or, in the case of unemployment benefits, 13 consecutive
14-day periods'' after ``7 consecutive 14-day periods''.
``(ii) Employees with less than 10 years of service.--
Subject to clause (iii), in the case of an employee who has
less than 10 years of service (as so defined), with respect
to extended unemployment benefits, this paragraph shall apply
to such an employee in the same manner as this paragraph
would apply to an employee described in clause (i) if such
clause had not been enacted.
``(iii) Application.--The provisions of clauses (i) and
(ii) shall apply to--
``(I) an employee who received normal benefits for days of
unemployment under this Act during the period beginning on
July 1, 2002, and ending on November 30, 2003; and
``(II) days of unemployment beginning on or after the date
of enactment of Jobs and Growth Reconciliation Tax Relief Act
of 2003.''.
TITLE VI--OTHER PROVISIONS
Subtitle A--Provisions Designed To Curtail Tax Shelters
SEC. 601. CLARIFICATION OF ECONOMIC SUBSTANCE DOCTRINE.
(a) In General.--Section 7701 is amended by redesignating
subsection (n) as subsection (o) and by inserting after
subsection (m) the following new subsection:
``(n) Clarification of Economic Substance Doctrine; Etc.--
``(1) General rules.--
``(A) In general.--In applying the economic substance
doctrine, the determination of whether a transaction has
economic substance shall be made as provided in this
paragraph.
``(B) Definition of economic substance.--For purposes of
subparagraph (A)--
``(i) In general.--A transaction has economic substance
only if--
``(I) the transaction changes in a meaningful way (apart
from Federal tax effects) the taxpayer's economic position,
and
``(II) the taxpayer has a substantial nontax purpose for
entering into such transaction and the transaction is a
reasonable means of accomplishing such purpose.
In applying subclause (II), a purpose of achieving a
financial accounting benefit shall not be taken into account
in determining whether a transaction has a substantial nontax
purpose if the origin of such financial accounting benefit is
a reduction of income tax.
``(ii) Special rule where taxpayer relies on profit
potential.--A transaction shall not be treated as having
economic substance by reason of having a potential for profit
unless--
``(I) the present value of the reasonably expected pre-tax
profit from the transaction is substantial in relation to the
present value of the expected net tax benefits that would be
allowed if the transaction were respected, and
``(II) the reasonably expected pre-tax profit from the
transaction exceeds a risk-free rate of return.
``(C) Treatment of fees and foreign taxes.--Fees and other
transaction expenses and foreign taxes shall be taken into
account as expenses in determining pre-tax profit under
subparagraph (B)(ii).
``(2) Special rules for transactions with tax-indifferent
parties.--
``(A) Special rules for financing transactions.--The form
of a transaction which is in substance the borrowing of money
or the acquisition of financial capital directly or
indirectly from a tax-indifferent party shall not be
respected if the present value of the deductions to be
claimed with respect to the transaction is substantially in
excess of the present value of the anticipated economic
returns of the person lending the money or providing the
financial capital. A public offering shall be treated as a
borrowing, or an acquisition of financial capital, from a
tax-indifferent party if it is reasonably expected that at
least 50 percent of the offering will be placed with tax-
indifferent parties.
``(B) Artificial income shifting and basis adjustments.--
The form of a transaction with a tax-indifferent party shall
not be respected if--
``(i) it results in an allocation of income or gain to the
tax-indifferent party in excess of such party's economic
income or gain, or
``(ii) it results in a basis adjustment or shifting of
basis on account of overstating the income or gain of the
tax-indifferent party.
``(3) Definitions and special rules.--For purposes of this
subsection--
``(A) Economic substance doctrine.--The term `economic
substance doctrine' means the common law doctrine under which
tax benefits under subtitle A with respect to a transaction
are not allowable if the transaction does not have economic
substance or lacks a business purpose.
``(B) Tax-indifferent party.--The term `tax-indifferent
party' means any person or entity not subject to tax imposed
by subtitle A. A person shall be treated as a tax-indifferent
party with respect to a transaction if the items taken into
account with respect to the transaction have no substantial
impact on such person's liability under subtitle A.
``(C) Exception for personal transactions of individuals.--
In the case of an individual, this subsection shall apply
only to transactions entered into in connection with a trade
or business or an activity engaged in for the production of
income.
``(D) Treatment of lessors.--A lessor of tangible property
subject to a lease shall be treated as satisfying the
requirements of paragraph (1)(B)(ii) with respect to the
leased property if such lease satisfies such requirements as
provided by the Secretary.
``(4) Other common law doctrines not affected.--Except as
specifically provided in this subsection, the provisions of
this subsection shall not be construed as altering or
supplanting any other rule of law, and the requirements of
this subsection shall be construed as being in addition to
any such other rule of law.
``(5) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this subsection. Such regulations may include
exemptions from the application of this subsection.''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions entered into on or after May 8,
2003.
[[Page S6395]]
SEC. 602. PENALTY FOR FAILING TO DISCLOSE REPORTABLE
TRANSACTION.
(a) In General.--Part I of subchapter B of chapter 68
(relating to assessable penalties) is amended by inserting
after section 6707 the following new section:
``SEC. 6707A. PENALTY FOR FAILURE TO INCLUDE REPORTABLE
TRANSACTION INFORMATION WITH RETURN OR
STATEMENT.
``(a) Imposition of Penalty.--Any person who fails to
include on any return or statement any information with
respect to a reportable transaction which is required under
section 6011 to be included with such return or statement
shall pay a penalty in the amount determined under subsection
(b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraphs (2) and
(3), the amount of the penalty under subsection (a) shall be
$50,000.
``(2) Listed transaction.--The amount of the penalty under
subsection (a) with respect to a listed transaction shall be
$100,000.
``(3) Increase in penalty for large entities and high net
worth individuals.--
``(A) In general.--In the case of a failure under
subsection (a) by--
``(i) a large entity, or
``(ii) a high net worth individual,
the penalty under paragraph (1) or (2) shall be twice the
amount determined without regard to this paragraph.
``(B) Large entity.--For purposes of subparagraph (A), the
term `large entity' means, with respect to any taxable year,
a person (other than a natural person) with gross receipts in
excess of $10,000,000 for the taxable year in which the
reportable transaction occurs or the preceding taxable year.
Rules similar to the rules of paragraph (2) and subparagraphs
(B), (C), and (D) of paragraph (3) of section 448(c) shall
apply for purposes of this subparagraph.
``(C) High net worth individual.--For purposes of
subparagraph (A), the term `high net worth individual' means,
with respect to a reportable transaction, a natural person
whose net worth exceeds $2,000,000 immediately before the
transaction.
``(c) Definitions.--For purposes of this section--
``(1) Reportable transaction.--The term `reportable
transaction' means any transaction with respect to which
information is required to be included with a return or
statement because, as determined under regulations prescribed
under section 6011, such transaction is of a type which the
Secretary determines as having a potential for tax avoidance
or evasion.
``(2) Listed transaction.--Except as provided in
regulations, the term `listed transaction' means a reportable
transaction which is the same as, or substantially similar
to, a transaction specifically identified by the Secretary as
a tax avoidance transaction for purposes of section 6011.
``(d) Authority To Rescind Penalty.--
``(1) In general.--The Commissioner of Internal Revenue may
rescind all or any portion of any penalty imposed by this
section with respect to any violation if--
``(A) the violation is with respect to a reportable
transaction other than a listed transaction,
``(B) the person on whom the penalty is imposed has a
history of complying with the requirements of this title,
``(C) it is shown that the violation is due to an
unintentional mistake of fact;
``(D) imposing the penalty would be against equity and good
conscience, and
``(E) rescinding the penalty would promote compliance with
the requirements of this title and effective tax
administration.
``(2) Discretion.--The exercise of authority under
paragraph (1) shall be at the sole discretion of the
Commissioner and may be delegated only to the head of the
Office of Tax Shelter Analysis. The Commissioner, in the
Commissioner's sole discretion, may establish a procedure to
determine if a penalty should be referred to the Commissioner
or the head of such Office for a determination under
paragraph (1).
``(3) No appeal.--Notwithstanding any other provision of
law, any determination under this subsection may not be
reviewed in any administrative or judicial proceeding.
``(4) Records.--If a penalty is rescinded under paragraph
(1), the Commissioner shall place in the file in the Office
of the Commissioner the opinion of the Commissioner or the
head of the Office of Tax Shelter Analysis with respect to
the determination, including--
``(A) the facts and circumstances of the transaction,
``(B) the reasons for the rescission, and
``(C) the amount of the penalty rescinded.
``(5) Report.--The Commissioner shall each year report to
the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate--
``(A) a summary of the total number and aggregate amount of
penalties imposed, and rescinded, under this section, and
``(B) a description of each penalty rescinded under this
subsection and the reasons therefor.
``(e) Penalty Reported to SEC.--In the case of a person--
``(1) which is required to file periodic reports under
section 13 or 15(d) of the Securities Exchange Act of 1934 or
is required to be consolidated with another person for
purposes of such reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,
the requirement to pay such penalty shall be disclosed in
such reports filed by such person for such periods as the
Secretary shall specify. Failure to make a disclosure in
accordance with the preceding sentence shall be treated as a
failure to which the penalty under subsection (b)(2) applies.
``(f) Coordination With Other Penalties.--The penalty
imposed by this section is in addition to any penalty imposed
under this title.''.
(b) Conforming Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by inserting after
the item relating to section 6707 the following:
``Sec. 6707A. Penalty for failure to include reportable transaction
information with return or statement.''.
(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.
SEC. 603. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662 the following new section:
``SEC. 6662A. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERSTATEMENTS WITH RESPECT TO REPORTABLE
TRANSACTIONS.
``(a) Imposition of Penalty.--If a taxpayer has a
reportable transaction understatement for any taxable year,
there shall be added to the tax an amount equal to 20 percent
of the amount of such understatement.
``(b) Reportable Transaction Understatement.--For purposes
of this section--
``(1) In general.--The term `reportable transaction
understatement' means the sum of--
``(A) the product of--
``(i) the amount of the increase (if any) in taxable income
which results from a difference between the proper tax
treatment of an item to which this section applies and the
taxpayer's treatment of such item (as shown on the taxpayer's
return of tax), and
``(ii) the highest rate of tax imposed by section 1
(section 11 in the case of a taxpayer which is a
corporation), and
``(B) the amount of the decrease (if any) in the aggregate
amount of credits determined under subtitle A which results
from a difference between the taxpayer's treatment of an item
to which this section applies (as shown on the taxpayer's
return of tax) and the proper tax treatment of such item.
For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(c) Higher Penalty for Nondisclosed Listed and Other
Avoidance Transactions.--
``(1) In general.--Subsection (a) shall be applied by
substituting `30 percent' for `20 percent' with respect to
the portion of any reportable transaction understatement with
respect to which the requirement of section 6664(d)(2)(A) is
not met.
``(2) Rules applicable to compromise of penalty.--
``(A) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which paragraph (1)
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(B) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
subparagraph (A).
``(d) Definitions of Reportable and Listed Transactions.--
For purposes of this section, the terms `reportable
transaction' and `listed transaction' have the respective
meanings given to such terms by section 6707A(c).
``(e) Special Rules.--
``(1) Coordination with penalties, etc., on other
understatements.--In the case of an understatement (as
defined in section 6662(d)(2))--
``(A) the amount of such understatement (determined without
regard to this paragraph) shall be increased by the aggregate
amount of reportable transaction understatements and
noneconomic substance transaction understatements for
purposes of determining whether such understatement is a
substantial understatement under section 6662(d)(1), and
``(B) the addition to tax under section 6662(a) shall apply
only to the excess of the amount of the substantial
understatement (if any) after the application of subparagraph
(A) over the aggregate amount of reportable
[[Page S6396]]
transaction understatements and noneconomic substance
transaction understatements.
``(2) Coordination with other penalties.--
``(A) Application of fraud penalty.--References to an
underpayment in section 6663 shall be treated as including
references to a reportable transaction understatement and a
noneconomic substance transaction understatement.
``(B) No double penalty.--This section shall not apply to
any portion of an understatement on which a penalty is
imposed under section 6662B or 6663.
``(3) Special rule for amended returns.--Except as provided
in regulations, in no event shall any tax treatment included
with an amendment or supplement to a return of tax be taken
into account in determining the amount of any reportable
transaction understatement or noneconomic substance
transaction understatement if the amendment or supplement is
filed after the earlier of the date the taxpayer is first
contacted by the Secretary regarding the examination of the
return or such other date as is specified by the Secretary.
``(4) Noneconomic substance transaction understatement.--
For purposes of this subsection, the term `noneconomic
substance transaction understatement' has the meaning given
such term by section 6662B(c).
``(5) Cross reference.--
``For reporting of section 6662A(c) penalty to the Securities and
Exchange Commission, see section 6707A(e).''.
(b) Determination of Other Understatements.--Subparagraph
(A) of section 6662(d)(2) is amended by adding at the end the
following flush sentence:
``The excess under the preceding sentence shall be determined
without regard to items to which section 6662A applies and
without regard to items with respect to which a penalty is
imposed by section 6662B.''.
(c) Reasonable Cause Exception.--
(1) In general.--Section 6664 is amended by adding at the
end the following new subsection:
``(d) Reasonable Cause Exception for Reportable Transaction
Understatements.--
``(1) In general.--No penalty shall be imposed under
section 6662A with respect to any portion of a reportable
transaction understatement if it is shown that there was a
reasonable cause for such portion and that the taxpayer acted
in good faith with respect to such portion.
``(2) Special rules.--Paragraph (1) shall not apply to any
reportable transaction understatement unless--
``(A) the relevant facts affecting the tax treatment of the
item are adequately disclosed in accordance with the
regulations prescribed under section 6011,
``(B) there is or was substantial authority for such
treatment, and
``(C) the taxpayer reasonably believed that such treatment
was more likely than not the proper treatment.
A taxpayer failing to adequately disclose in accordance with
section 6011 shall be treated as meeting the requirements of
subparagraph (A) if the penalty for such failure was
rescinded under section 6707A(d).
``(3) Rules relating to reasonable belief.--For purposes of
paragraph (2)(C)--
``(A) In general.--A taxpayer shall be treated as having a
reasonable belief with respect to the tax treatment of an
item only if such belief--
``(i) is based on the facts and law that exist at the time
the return of tax which includes such tax treatment is filed,
and
``(ii) relates solely to the taxpayer's chances of success
on the merits of such treatment and does not take into
account the possibility that a return will not be audited,
such treatment will not be raised on audit, or such treatment
will be resolved through settlement if it is raised.
``(B) Certain opinions may not be relied upon.--
``(i) In general.--An opinion of a tax advisor may not be
relied upon to establish the reasonable belief of a taxpayer
if--
``(I) the tax advisor is described in clause (ii), or
``(II) the opinion is described in clause (iii).
``(ii) Disqualified tax advisors.--A tax advisor is
described in this clause if the tax advisor--
``(I) is a material advisor (within the meaning of section
6111(b)(1)) who participates in the organization, management,
promotion, or sale of the transaction or who is related
(within the meaning of section 267(b) or 707(b)(1)) to any
person who so participates,
``(II) is compensated directly or indirectly by a material
advisor with respect to the transaction,
``(III) has a fee arrangement with respect to the
transaction which is contingent on all or part of the
intended tax benefits from the transaction being sustained,
or
``(IV) as determined under regulations prescribed by the
Secretary, has a continuing financial interest with respect
to the transaction.
``(iii) Disqualified opinions.--For purposes of clause (i),
an opinion is disqualified if the opinion--
``(I) is based on unreasonable factual or legal assumptions
(including assumptions as to future events),
``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.
(2) Conforming amendment.--The heading for subsection (c)
of section 6664 is amended by inserting ``for Underpayments''
after ``Exception''.
(d) Conforming Amendments.--
(1) Subparagraph (C) of section 461(i)(3) is amended by
striking ``section 6662(d)(2)(C)(iii)'' and inserting
``section 1274(b)(3)(C)''.
(2) Paragraph (3) of section 1274(b) is amended--
(A) by striking ``(as defined in section
6662(d)(2)(C)(iii))'' in subparagraph (B)(i), and
(B) by adding at the end the following new subparagraph:
``(C) Tax shelter.--For purposes of subparagraph (B), the
term `tax shelter' means--
``(i) a partnership or other entity,
``(ii) any investment plan or arrangement, or
``(iii) any other plan or arrangement,
if a significant purpose of such partnership, entity, plan,
or arrangement is the avoidance or evasion of Federal income
tax.''.
(3) Section 6662(d)(2) is amended by striking subparagraphs
(C) and (D).
(4) Section 6664(c)(1) is amended by striking ``this part''
and inserting ``section 6662 or 6663''.
(5) Subsection (b) of section 7525 is amended by striking
``section 6662(d)(2)(C)(iii)'' and inserting ``section
1274(b)(3)(C)''.
(6)(A) The heading for section 6662 is amended to read as
follows:
``SEC. 6662. IMPOSITION OF ACCURACY-RELATED PENALTY ON
UNDERPAYMENTS.''.
(B) The table of sections for part II of subchapter A of
chapter 68 is amended by striking the item relating to
section 6662 and inserting the following new items:
``Sec. 6662. Imposition of accuracy-related penalty on underpayments.
``Sec. 6662A. Imposition of accuracy-related penalty on understatements
with respect to reportable transactions.''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years ending after the date of the
enactment of this Act.
SEC. 604. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
(a) In General.--Subchapter A of chapter 68 is amended by
inserting after section 6662A the following new section:
``SEC. 6662B. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.
``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item are adequately disclosed in the return or a
statement attached to the return.
``(c) Noneconomic Substance Transaction Understatement.--
For purposes of this section--
``(1) In general.--The term `noneconomic substance
transaction understatement' means any amount which would be
an understatement under section 6662A(b)(1) if section 6662A
were applied by taking into account items attributable to
noneconomic substance transactions rather than items to which
section 6662A would apply without regard to this paragraph.
``(2) Noneconomic substance transaction.--The term
`noneconomic substance transaction' means any transaction
if--
``(A) there is a lack of economic substance (within the
meaning of section 7701(n)(1)) for the transaction giving
rise to the claimed benefit or the transaction was not
respected under section 7701(n)(2), or
``(B) the transaction fails to meet the requirements of any
similar rule of law.
``(d) Rules Applicable To Compromise of Penalty.--
``(1) In general.--If the 1st letter of proposed deficiency
which allows the taxpayer an opportunity for administrative
review in the Internal Revenue Service Office of Appeals has
been sent with respect to a penalty to which this section
applies, only the Commissioner of Internal Revenue may
compromise all or any portion of such penalty.
``(2) Applicable rules.--The rules of paragraphs (2), (3),
(4), and (5) of section 6707A(d) shall apply for purposes of
paragraph (1).
``(e) Coordination With Other Penalties.--Except as
otherwise provided in this part, the penalty imposed by this
section shall be in addition to any other penalty imposed by
this title.
``(f) Cross References.--
``(1) For coordination of penalty with understatements under section
6662 and other special rules, see section 6662A(e).
``(2) For reporting of penalty imposed under this section to the
Securities and Exchange Commission, see section 6707A(e).''.
(b) Clerical Amendment.--The table of sections for part II
of subchapter A of chapter 68 is amended by inserting after
the item relating to section 6662A the following new item:
[[Page S6397]]
``Sec. 6662B. Penalty for understatements attributable to transactions
lacking economic substance, etc.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions entered into on or after May 8,
2003.
SEC. 605. MODIFICATIONS OF SUBSTANTIAL UNDERSTATEMENT PENALTY
FOR NONREPORTABLE TRANSACTIONS.
(a) Substantial Understatement of Corporations.--Section
6662(d)(1)(B) (relating to special rule for corporations) is
amended to read as follows:
``(B) Special rule for corporations.--In the case of a
corporation other than an S corporation or a personal holding
company (as defined in section 542), there is a substantial
understatement of income tax for any taxable year if the
amount of the understatement for the taxable year exceeds the
lesser of--
``(i) 10 percent of the tax required to be shown on the
return for the taxable year (or, if greater, $10,000), or
``(ii) $10,000,000.''.
(b) Reduction for Understatement of Taxpayer Due to
Position of Taxpayer or Disclosed Item.--
(1) In general.--Section 6662(d)(2)(B)(i) (relating to
substantial authority) is amended to read as follows:
``(i) the tax treatment of any item by the taxpayer if the
taxpayer had reasonable belief that the tax treatment was
more likely than not the proper treatment, or''.
(2) Conforming amendment.--Section 6662(d) is amended by
adding at the end the following new paragraph:
``(3) Secretarial list.--For purposes of this subsection,
section 6664(d)(2), and section 6694(a)(1), the Secretary may
prescribe a list of positions for which the Secretary
believes there is not substantial authority or there is no
reasonable belief that the tax treatment is more likely than
not the proper tax treatment. Such list (and any revisions
thereof) shall be published in the Federal Register or the
Internal Revenue Bulletin.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
SEC. 606. TAX SHELTER EXCEPTION TO CONFIDENTIALITY PRIVILEGES
RELATING TO TAXPAYER COMMUNICATIONS.
(a) In General.--Section 7525(b) (relating to section not
to apply to communications regarding corporate tax shelters)
is amended to read as follows:
``(b) Section Not To Apply to Communications Regarding Tax
Shelters.--The privilege under subsection (a) shall not apply
to any written communication which is--
``(1) between a federally authorized tax practitioner and--
``(A) any person,
``(B) any director, officer, employee, agent, or
representative of the person, or
``(C) any other person holding a capital or profits
interest in the person, and
``(2) in connection with the promotion of the direct or
indirect participation of the person in any tax shelter (as
defined in section 1274(b)(3)(C)).''.
(b) Effective Date.--The amendment made by this section
shall apply to communications made on or after the date of
the enactment of this Act.
SEC. 607. DISCLOSURE OF REPORTABLE TRANSACTIONS.
(a) In General.--Section 6111 (relating to registration of
tax shelters) is amended to read as follows:
``SEC. 6111. DISCLOSURE OF REPORTABLE TRANSACTIONS.
``(a) In General.--Each material advisor with respect to
any reportable transaction shall make a return (in such form
as the Secretary may prescribe) setting forth--
``(1) information identifying and describing the
transaction,
``(2) information describing any potential tax benefits
expected to result from the transaction, and
``(3) such other information as the Secretary may
prescribe.
Such return shall be filed not later than the date specified
by the Secretary.
``(b) Definitions.--For purposes of this section--
``(1) Material advisor.--
``(A) In general.--The term `material advisor' means any
person--
``(i) who provides any material aid, assistance, or advice
with respect to organizing, promoting, selling, implementing,
or carrying out any reportable transaction, and
``(ii) who directly or indirectly derives gross income in
excess of the threshold amount for such aid, assistance, or
advice.
``(B) Threshold amount.--For purposes of subparagraph (A),
the threshold amount is--
``(i) $50,000 in the case of a reportable transaction
substantially all of the tax benefits from which are provided
to natural persons, and
``(ii) $250,000 in any other case.
``(2) Reportable transaction.--The term `reportable
transaction' has the meaning given to such term by section
6707A(c).
``(c) Regulations.--The Secretary may prescribe regulations
which provide--
``(1) that only 1 person shall be required to meet the
requirements of subsection (a) in cases in which 2 or more
persons would otherwise be required to meet such
requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6111. Disclosure of reportable transactions.''.
(2)(A) So much of section 6112 as precedes subsection (c)
thereof is amended to read as follows:
``SEC. 6112. MATERIAL ADVISORS OF REPORTABLE TRANSACTIONS
MUST KEEP LISTS OF ADVISEES.
``(a) In General.--Each material advisor (as defined in
section 6111) with respect to any reportable transaction (as
defined in section 6707A(c)) shall maintain, in such manner
as the Secretary may by regulations prescribe, a list--
``(1) identifying each person with respect to whom such
advisor acted as such a material advisor with respect to such
transaction, and
``(2) containing such other information as the Secretary
may by regulations require.
This section shall apply without regard to whether a material
advisor is required to file a return under section 6111 with
respect to such transaction.''.
(B) Section 6112 is amended by redesignating subsection (c)
as subsection (b).
(C) Section 6112(b), as redesignated by subparagraph (B),
is amended--
(i) by inserting ``written'' before ``request'' in
paragraph (1)(A), and
(ii) by striking ``shall prescribe'' in paragraph (2) and
inserting ``may prescribe''.
(D) The item relating to section 6112 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:
``Sec. 6112. Material advisors of reportable transactions must keep
lists of advisees.''.
(3)(A) The heading for section 6708 is amended to read as
follows:
``SEC. 6708. FAILURE TO MAINTAIN LISTS OF ADVISEES WITH
RESPECT TO REPORTABLE TRANSACTIONS.''.
(B) The item relating to section 6708 in the table of
sections for part I of subchapter B of chapter 68 is amended
to read as follows:
``Sec. 6708. Failure to maintain lists of advisees with respect to
reportable transactions.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions with respect to which material
aid, assistance, or advice referred to in section
6111(b)(1)(A)(i) of the Internal Revenue Code of 1986 (as
added by this section) is provided after the date of the
enactment of this Act.
SEC. 608. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.
(a) In General.--Section 6707 (relating to failure to
furnish information regarding tax shelters) is amended to
read as follows:
``SEC. 6707. FAILURE TO FURNISH INFORMATION REGARDING
REPORTABLE TRANSACTIONS.
``(a) In General.--If a person who is required to file a
return under section 6111(a) with respect to any reportable
transaction--
``(1) fails to file such return on or before the date
prescribed therefor, or
``(2) files false or incomplete information with the
Secretary with respect to such transaction,
such person shall pay a penalty with respect to such return
in the amount determined under subsection (b).
``(b) Amount of Penalty.--
``(1) In general.--Except as provided in paragraph (2), the
penalty imposed under subsection (a) with respect to any
failure shall be $50,000.
``(2) Listed transactions.--The penalty imposed under
subsection (a) with respect to any listed transaction shall
be an amount equal to the greater of--
``(A) $200,000, or
``(B) 50 percent of the gross income derived by such person
with respect to aid, assistance, or advice which is provided
with respect to the listed transaction before the date the
return including the transaction is filed under section 6111.
Subparagraph (B) shall be applied by substituting `75
percent' for `50 percent' in the case of an intentional
failure or act described in subsection (a).
``(c) Rescission Authority.--The provisions of section
6707A(d) (relating to authority of Commissioner to rescind
penalty) shall apply to any penalty imposed under this
section.
``(d) Reportable and Listed Transactions.--The terms
`reportable transaction' and `listed transaction' have the
respective meanings given to such terms by section
6707A(c).''.
(b) Clerical Amendment.--The item relating to section 6707
in the table of sections for part I of subchapter B of
chapter 68 is amended by striking ``tax shelters'' and
inserting ``reportable transactions''.
(c) Effective Date.--The amendments made by this section
shall apply to returns the due date for which is after the
date of the enactment of this Act.
SEC. 609. MODIFICATION OF PENALTY FOR FAILURE TO MAINTAIN
LISTS OF INVESTORS.
(a) In General.--Subsection (a) of section 6708 is amended
to read as follows:
``(a) Imposition of Penalty.--
``(1) In general.--If any person who is required to
maintain a list under section 6112(a) fails to make such list
available upon written request to the Secretary in accordance
with section 6112(b)(1)(A) within 20 business days after the
date of the Secretary's
[[Page S6398]]
request, such person shall pay a penalty of $10,000 for each
day of such failure after such 20th day.
``(2) Reasonable cause exception.--No penalty shall be
imposed by paragraph (1) with respect to the failure on any
day if such failure is due to reasonable cause.''.
(b) Effective Date.--The amendment made by this section
shall apply to requests made after the date of the enactment
of this Act.
SEC. 610. MODIFICATION OF ACTIONS TO ENJOIN CERTAIN CONDUCT
RELATED TO TAX SHELTERS AND REPORTABLE
TRANSACTIONS.
(a) In General.--Section 7408 (relating to action to enjoin
promoters of abusive tax shelters, etc.) is amended by
redesignating subsection (c) as subsection (d) and by
striking subsections (a) and (b) and inserting the following
new subsections:
``(a) Authority To Seek Injunction.--A civil action in the
name of the United States to enjoin any person from further
engaging in specified conduct may be commenced at the request
of the Secretary. Any action under this section shall be
brought in the district court of the United States for the
district in which such person resides, has his principal
place of business, or has engaged in specified conduct. The
court may exercise its jurisdiction over such action (as
provided in section 7402(a)) separate and apart from any
other action brought by the United States against such
person.
``(b) Adjudication and Decree.--In any action under
subsection (a), if the court finds--
``(1) that the person has engaged in any specified conduct,
and
``(2) that injunctive relief is appropriate to prevent
recurrence of such conduct,
the court may enjoin such person from engaging in such
conduct or in any other activity subject to penalty under
this title.
``(c) Specified Conduct.--For purposes of this section, the
term `specified conduct' means any action, or failure to take
action, subject to penalty under section 6700, 6701, 6707, or
6708.''.
(b) Conforming Amendments.--
(1) The heading for section 7408 is amended to read as
follows:
``SEC. 7408. ACTIONS TO ENJOIN SPECIFIED CONDUCT RELATED TO
TAX SHELTERS AND REPORTABLE TRANSACTIONS.''.
(2) The table of sections for subchapter A of chapter 67 is
amended by striking the item relating to section 7408 and
inserting the following new item:
``Sec. 7408. Actions to enjoin specified conduct related to tax
shelters and reportable transactions.''.
(c) Effective Date.--The amendment made by this section
shall take effect on the day after the date of the enactment
of this Act.
SEC. 611. UNDERSTATEMENT OF TAXPAYER'S LIABILITY BY INCOME
TAX RETURN PREPARER.
(a) Standards Conformed to Taxpayer Standards.--Section
6694(a) (relating to understatements due to unrealistic
positions) is amended--
(1) by striking ``realistic possibility of being sustained
on its merits'' in paragraph (1) and inserting ``reasonable
belief that the tax treatment in such position was more
likely than not the proper treatment'',
(2) by striking ``or was frivolous'' in paragraph (3) and
inserting ``or there was no reasonable basis for the tax
treatment of such position'', and
(3) by striking ``Unrealistic'' in the heading and
inserting ``Improper''.
(b) Amount of Penalty.--Section 6694 is amended--
(1) by striking ``$250'' in subsection (a) and inserting
``$1,000'', and
(2) by striking ``$1,000'' in subsection (b) and inserting
``$5,000''.
(c) Effective Date.--The amendments made by this section
shall apply to documents prepared after the date of the
enactment of this Act.
SEC. 612. PENALTY ON FAILURE TO REPORT INTERESTS IN FOREIGN
FINANCIAL ACCOUNTS.
(a) In General.--Section 5321(a)(5) of title 31, United
States Code, is amended to read as follows:
``(5) Foreign financial agency transaction violation.--
``(A) Penalty authorized.--The Secretary of the Treasury
may impose a civil money penalty on any person who violates,
or causes any violation of, any provision of section 5314.
``(B) Amount of penalty.--
``(i) In general.--Except as provided in subparagraph (C),
the amount of any civil penalty imposed under subparagraph
(A) shall not exceed $5,000.
``(ii) Reasonable cause exception.--No penalty shall be
imposed under subparagraph (A) with respect to any violation
if--
``(I) such violation was due to reasonable cause, and
``(II) the amount of the transaction or the balance in the
account at the time of the transaction was properly reported.
``(C) Willful violations.--In the case of any person
willfully violating, or willfully causing any violation of,
any provision of section 5314--
``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--
``(I) $25,000, or
``(II) the amount (not exceeding $100,000) determined under
subparagraph (D), and
``(ii) subparagraph (B)(ii) shall not apply.
``(D) Amount.--The amount determined under this
subparagraph is--
``(i) in the case of a violation involving a transaction,
the amount of the transaction, or
``(ii) in the case of a violation involving a failure to
report the existence of an account or any identifying
information required to be provided with respect to an
account, the balance in the account at the time of the
violation.''.
(b) Effective Date.--The amendment made by this section
shall apply to violations occurring after the date of the
enactment of this Act.
SEC. 613. FRIVOLOUS TAX SUBMISSIONS.
(a) Civil Penalties.--Section 6702 is amended to read as
follows:
``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.
``(a) Civil Penalty for Frivolous Tax Returns.--A person
shall pay a penalty of $5,000 if--
``(1) such person files what purports to be a return of a
tax imposed by this title but which--
``(A) does not contain information on which the substantial
correctness of the self-assessment may be judged, or
``(B) contains information that on its face indicates that
the self-assessment is substantially incorrect; and
``(2) the conduct referred to in paragraph (1)--
``(A) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(B) reflects a desire to delay or impede the
administration of Federal tax laws.
``(b) Civil Penalty for Specified Frivolous Submissions.--
``(1) Imposition of penalty.--Except as provided in
paragraph (3), any person who submits a specified frivolous
submission shall pay a penalty of $5,000.
``(2) Specified frivolous submission.--For purposes of this
section--
``(A) Specified frivolous submission.--The term `specified
frivolous submission' means a specified submission if any
portion of such submission--
``(i) is based on a position which the Secretary has
identified as frivolous under subsection (c), or
``(ii) reflects a desire to delay or impede the
administration of Federal tax laws.
``(B) Specified submission.--The term `specified
submission' means--
``(i) a request for a hearing under--
``(I) section 6320 (relating to notice and opportunity for
hearing upon filing of notice of lien), or
``(II) section 6330 (relating to notice and opportunity for
hearing before levy), and
``(ii) an application under--
``(I) section 6159 (relating to agreements for payment of
tax liability in installments),
``(II) section 7122 (relating to compromises), or
``(III) section 7811 (relating to taxpayer assistance
orders).
``(3) Opportunity to withdraw submission.--If the Secretary
provides a person with notice that a submission is a
specified frivolous submission and such person withdraws such
submission within 30 days after such notice, the penalty
imposed under paragraph (1) shall not apply with respect to
such submission.
``(c) Listing of Frivolous Positions.--The Secretary shall
prescribe (and periodically revise) a list of positions which
the Secretary has identified as being frivolous for purposes
of this subsection. The Secretary shall not include in such
list any position that the Secretary determines meets the
requirement of section 6662(d)(2)(B)(ii)(II).
``(d) Reduction of Penalty.--The Secretary may reduce the
amount of any penalty imposed under this section if the
Secretary determines that such reduction would promote
compliance with and administration of the Federal tax laws.
``(e) Penalties in Addition to Other Penalties.--The
penalties imposed by this section shall be in addition to any
other penalty provided by law.''.
(b) Treatment of Frivolous Requests for Hearings Before
Levy.--
(1) Frivolous requests disregarded.--Section 6330 (relating
to notice and opportunity for hearing before levy) is amended
by adding at the end the following new subsection:
``(g) Frivolous Requests for Hearing, Etc.--Notwithstanding
any other provision of this section, if the Secretary
determines that any portion of a request for a hearing under
this section or section 6320 meets the requirement of clause
(i) or (ii) of section 6702(b)(2)(A), then the Secretary may
treat such portion as if it were never submitted and such
portion shall not be subject to any further administrative or
judicial review.''.
(2) Preclusion from raising frivolous issues at hearing.--
Section 6330(c)(4) is amended--
(A) by striking ``(A)'' and inserting ``(A)(i)'';
(B) by striking ``(B)'' and inserting ``(ii)'';
(C) by striking the period at the end of the first sentence
and inserting ``; or''; and
(D) by inserting after subparagraph (A)(ii) (as so
redesignated) the following:
``(B) the issue meets the requirement of clause (i) or (ii)
of section 6702(b)(2)(A).''.
(3) Statement of grounds.--Section 6330(b)(1) is amended by
striking ``under subsection (a)(3)(B)'' and inserting ``in
writing under subsection (a)(3)(B) and states the grounds for
the requested hearing''.
(c) Treatment of Frivolous Requests for Hearings Upon
Filing of Notice of Lien.--Section 6320 is amended--
[[Page S6399]]
(1) in subsection (b)(1), by striking ``under subsection
(a)(3)(B)'' and inserting ``in writing under subsection
(a)(3)(B) and states the grounds for the requested hearing'',
and
(2) in subsection (c), by striking ``and (e)'' and
inserting ``(e), and (g)''.
(d) Treatment of Frivolous Applications for Offers-in-
Compromise and Installment Agreements.--Section 7122 is
amended by adding at the end the following new subsection:
``(e) Frivolous Submissions, Etc.--Notwithstanding any
other provision of this section, if the Secretary determines
that any portion of an application for an offer-in-compromise
or installment agreement submitted under this section or
section 6159 meets the requirement of clause (i) or (ii) of
section 6702(b)(2)(A), then the Secretary may treat such
portion as if it were never submitted and such portion shall
not be subject to any further administrative or judicial
review.''.
(e) Clerical Amendment.--The table of sections for part I
of subchapter B of chapter 68 is amended by striking the item
relating to section 6702 and inserting the following new
item:
``Sec. 6702. Frivolous tax submissions.''.
(f) Effective Date.--The amendments made by this section
shall apply to submissions made and issues raised after the
date on which the Secretary first prescribes a list under
section 6702(c) of the Internal Revenue Code of 1986, as
amended by subsection (a).
SEC. 614. PENALTY ON PROMOTERS OF TAX SHELTERS.
(a) Penalty on Promoting Abusive Tax Shelters.--Section
6700(a) is amended by adding at the end the following new
sentence: ``Notwithstanding the first sentence, if an
activity with respect to which a penalty imposed under this
subsection involves a statement described in paragraph
(2)(A), the amount of the penalty shall be equal to 50
percent of the gross income derived (or to be derived) from
such activity by the person on which the penalty is
imposed.''.
(b) Effective Date.--The amendment made by this section
shall apply to activities after the date of the enactment of
this Act.
SEC. 615. STATUTE OF LIMITATIONS FOR TAXABLE YEARS FOR WHICH
LISTED TRANSACTIONS NOT REPORTED.
(a) In General.--Section 6501(e)(1) (relating to
substantial omission of items for income taxes) is amended by
adding at the end the following new subparagraph:
``(C) Listed transactions.--If a taxpayer fails to include
on any return or statement for any taxable year any
information with respect to a listed transaction (as defined
in section 6707A(c)(2)) which is required under section 6011
to be included with such return or statement, the tax for
such taxable year may be assessed, or a proceeding in court
for collection of such tax may be begun without assessment,
at any time within 6 years after the time the return is
filed. This subparagraph shall not apply to any taxable year
if the time for assessment or beginning the proceeding in
court has expired before the time a transaction is treated as
a listed transaction under section 6011.''.
(b) Effective Date.--The amendment made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
SEC. 616. DENIAL OF DEDUCTION FOR INTEREST ON UNDERPAYMENTS
ATTRIBUTABLE TO NONDISCLOSED REPORTABLE AND
NONECONOMIC SUBSTANCE TRANSACTIONS.
(a) In General.--Section 163 (relating to deduction for
interest) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following new subsection:
``(m) Interest on Unpaid Taxes Attributable To Nondisclosed
Reportable Transactions and Noneconomic Substance
Transactions.--No deduction shall be allowed under this
chapter for any interest paid or accrued under section 6601
on any underpayment of tax which is attributable to--
``(1) the portion of any reportable transaction
understatement (as defined in section 6662A(b)) with respect
to which the requirement of section 6664(d)(2)(A) is not met,
or
``(2) any noneconomic substance transaction understatement
(as defined in section 6662B(c)).''.
(b) Effective Date.--The amendments made by this section
shall apply to transactions in taxable years beginning after
the date of the enactment of this Act.
Subtitle B--Enron-Related Tax Shelter Provisions
SEC. 621. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.
(a) In General.--Section 362 (relating to basis to
corporations) is amended by adding at the end the following
new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired in
such transaction shall (notwithstanding subsections (a) and
(b)) be its fair market value immediately after such
transaction.
``(B) Property described.--For purposes of subparagraph
(A), property is described in this subparagraph if--
``(i) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(ii) gain or loss with respect to such property is
subject to such tax in the hands of the transferee
immediately after such transfer.
In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(C) Importation of net built-in loss.--For purposes of
subparagraph (A), there is an importation of a net built-in
loss in a transaction if the transferee's aggregate adjusted
bases of property described in subparagraph (B) which is
transferred in such transaction would (but for this
paragraph) exceed the fair market value of such property
immediately after such transaction.''.
``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred by a transferor in any
transaction which is described in subsection (a) and which is
not described in paragraph (1) of this subsection, and
``(ii) the transferee's aggregate adjusted bases of such
property so transferred would (but for this paragraph) exceed
the fair market value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred shall
not exceed the fair market value of such property immediately
after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall be
allocated among the property so transferred in proportion to
their respective built-in losses immediately before the
transaction.
``(C) Exception for transfers within affiliated group.--
Subparagraph (A) shall not apply to any transaction if the
transferor owns stock in the transferee meeting the
requirements of section 1504(a)(2). In the case of property
to which subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair market
value immediately after the transfer.''.
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) (relating to liquidation of subsidiary) is
amended to read as follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(1)(B)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions after February 13, 2003.
SEC. 622. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK
HELD BY PARTNERSHIP IN CORPORATE PARTNER.
(a) In General.--Section 755 is amended by adding at the
end the following new subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any
decrease in the adjusted basis of partnership property under
section 734(b)--
``(1) no allocation may be made to stock in a corporation
(or any person which is related (within the meaning of
section 267(b) or 707(b)(1)) to such corporation) which is a
partner in the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to
other partnership property.
Gain shall be recognized to the partnership to the extent
that the amount required to be allocated under paragraph (2)
to other partnership property exceeds the aggregate adjusted
basis of such other property immediately before the
allocation required by paragraph (2).''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions after February 13, 2003.
SEC. 623. REPEAL OF SPECIAL RULES FOR FASITS.
(a) In General.--Part V of subchapter M of chapter 1
(relating to financial asset securitization investment
trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) is amended by striking
``REMIC, or FASIT'' and inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) is amended by
striking ``a REMIC to which part IV of subchapter M applies,
or a FASIT to which part V of subchapter M applies,'' and
inserting ``or a REMIC to which part IV of subchapter M
applies,''.
[[Page S6400]]
(3) Paragraph (1) of section 582(c) is amended by striking
``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) is amended by
striking the last sentence.
(5) Paragraph (5) of section 860G(a) is amended by adding
``and'' at the end of subparagraph (B), by striking ``, and''
at the end of subparagraph (C) and inserting a period, and by
striking subparagraph (D).
(6) Subparagraph (C) of section 1202(e)(4) is amended by
striking ``REMIC, or FASIT'' and inserting ``or REMIC''.
(7) Subparagraph (C) of section 7701(a)(19) is amended by
adding ``and'' at the end of clause (ix), by striking ``,
and'' at the end of clause (x) and inserting a period, and by
striking clause (xi).
(8) The table of parts for subchapter M of chapter 1 is
amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on February
14, 2003.
(2) Exception for existing fasits.--
(A) In general.--Paragraph (1) shall not apply to any FASIT
in existence on the date of the enactment of this Act to the
extent that regular interests issued by the FASIT before such
date continue to remain outstanding in accordance with the
original terms of issuance.
(B) Transfer of additional assets not permitted.--Except as
provided in regulations prescribed by the Secretary of the
Treasury or the Secretary's delegate, subparagraph (A) shall
cease to apply as of the earliest date after the date of the
enactment of this Act that any property is transferred to the
FASIT.
SEC. 624. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.
(a) In General.--Paragraph (2) of section 163(l) is amended
by striking ``or a related party'' and inserting ``or equity
held by the issuer (or any related party) in any other
person''.
(b) Exception for Certain Instruments Issued by Dealers in
Securities.--Section 163(l) is amended by redesignating
paragraphs (4) and (5) as paragraphs (5) and (6) and by
inserting after paragraph (3) the following new paragraph:
``(4) Exception for certain instruments issued by dealers
in securities.--For purposes of this subsection, the term
`disqualified debt instrument' does not include indebtedness
issued by a dealer in securities (or a related party) which
is payable in, or by reference to, equity (other than equity
of the issuer or a related party) held by such dealer in its
capacity as a dealer in securities. For purposes of this
paragraph, the term `dealer in securities' has the meaning
given such term by section 475.''.
(c) Conforming Amendment.--Paragraph (3) of section 163(l)
is amended by striking ``or a related party'' in the material
preceding subparagraph (A) and inserting ``or any other
person''.
(d) Effective Date.--The amendments made by this section
shall apply to debt instruments issued after February 13,
2003.
SEC. 625. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER
SECTION 269.
(a) In General.--Subsection (a) of section 269 (relating to
acquisitions made to evade or avoid income tax) is amended to
read as follows:
``(a) In General.--If--
``(1)(A) any person acquires stock in a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such
property, in the hands of the acquiring corporation, is
determined by reference to the basis in the hands of the
transferor corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax by
securing the benefit of a deduction, credit, or other
allowance,
then the Secretary may disallow such deduction, credit, or
other allowance.''.
(b) Effective Date.--The amendment made by this section
shall apply to stock and property acquired after February 13,
2003.
SEC. 626. MODIFICATIONS OF CERTAIN RULES RELATING TO
CONTROLLED FOREIGN CORPORATIONS.
(a) Limitation on Exception From PFIC Rules for United
States Shareholders of Controlled Foreign Corporations.--
Paragraph (2) of section 1297(e) (relating to passive
investment company) is amended by adding at the end the
following flush sentence:
``Such term shall not include any period if there is only a
remote likelihood of an inclusion in gross income under
section 951(a)(1)(A)(i) of subpart F income of such
corporation for such period.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years on controlled foreign
corporation beginning after February 13, 2003, and to taxable
years of United States shareholder in which or with which
such taxable years of controlled foreign corporations end.
Subtitle C--Provisions to Discourage Corporate Expatriation
SEC. 631. TAX TREATMENT OF INVERTED CORPORATE ENTITIES.
(a) In General.--Subchapter C of chapter 80 (relating to
provisions affecting more than one subtitle) is amended by
adding at the end the following new section:
``SEC. 7874. RULES RELATING TO INVERTED CORPORATE ENTITIES.
``(a) Inverted Corporations Treated as Domestic
Corporations.--
``(1) In general.--If a foreign incorporated entity is
treated as an inverted domestic corporation, then,
notwithstanding section 7701(a)(4), such entity shall be
treated for purposes of this title as a domestic corporation.
``(2) Inverted domestic corporation.--For purposes of this
section, a foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan (or a
series of related transactions)--
``(A) the entity completes after March 20, 2002, the direct
or indirect acquisition of substantially all of the
properties held directly or indirectly by a domestic
corporation or substantially all of the properties
constituting a trade or business of a domestic partnership,
``(B) after the acquisition at least 80 percent of the
stock (by vote or value) of the entity is held--
``(i) in the case of an acquisition with respect to a
domestic corporation, by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation, or
``(ii) in the case of an acquisition with respect to a
domestic partnership, by former partners of the domestic
partnership by reason of holding a capital or profits
interest in the domestic partnership, and
``(C) the expanded affiliated group which after the
acquisition includes the entity does not have substantial
business activities in the foreign country in which or under
the law of which the entity is created or organized when
compared to the total business activities of such expanded
affiliated group.
Except as provided in regulations, an acquisition of
properties of a domestic corporation shall not be treated as
described in subparagraph (A) if none of the corporation's
stock was readily tradeable on an established securities
market at any time during the 4-year period ending on the
date of the acquisition.
``(b) Preservation of Domestic Tax Base in Certain
Inversion Transactions to Which Subsection (a) Does Not
Apply.--
``(1) In general.--If a foreign incorporated entity would
be treated as an inverted domestic corporation with respect
to an acquired entity if either--
``(A) subsection (a)(2)(A) were applied by substituting
`after December 31, 1996, and on or before March 20, 2002'
for `after March 20, 2002' and subsection (a)(2)(B) were
applied by substituting `more than 50 percent' for `at least
80 percent', or
``(B) subsection (a)(2)(B) were applied by substituting
`more than 50 percent' for `at least 80 percent',
then the rules of subsection (c) shall apply to any inversion
gain of the acquired entity during the applicable period and
the rules of subsection (d) shall apply to any related party
transaction of the acquired entity during the applicable
period. This subsection shall not apply for any taxable year
if subsection (a) applies to such foreign incorporated entity
for such taxable year.
``(2) Acquired entity.--For purposes of this section--
``(A) In general.--The term `acquired entity' means the
domestic corporation or partnership substantially all of the
properties of which are directly or indirectly acquired in an
acquisition described in subsection (a)(2)(A) to which this
subsection applies.
``(B) Aggregation rules.--Any domestic person bearing a
relationship described in section 267(b) or 707(b) to an
acquired entity shall be treated as an acquired entity with
respect to the acquisition described in subparagraph (A).
``(3) Applicable period.--For purposes of this section--
``(A) In general.--The term `applicable period' means the
period--
``(i) beginning on the first date properties are acquired
as part of the acquisition described in subsection (a)(2)(A)
to which this subsection applies, and
``(ii) ending on the date which is 10 years after the last
date properties are acquired as part of such acquisition.
``(B) Special rule for inversions occurring before march
21, 2002.--In the case of any acquired entity to which
paragraph (1)(A) applies, the applicable period shall be the
10-year period beginning on January 1, 2003.
``(c) Tax on Inversion Gains May Not Be Offset.--If
subsection (b) applies--
``(1) In general.--The taxable income of an acquired entity
(or any expanded affiliated group which includes such entity)
for any taxable year which includes any portion of the
applicable period shall in no event be less than the
inversion gain of the entity for the taxable year.
``(2) Credits not allowed against tax on inversion gain.--
Credits shall be allowed against the tax imposed by this
chapter on an acquired entity for any taxable year described
in paragraph (1) only to the extent such tax exceeds the
product of--
``(A) the amount of the inversion gain for the taxable
year, and
``(B) the highest rate of tax specified in section
11(b)(1).
For purposes of determining the credit allowed by section 901
inversion gain shall be treated as from sources within the
United States.
``(3) Special rules for partnerships.--In the case of an
acquired entity which is a partnership--
[[Page S6401]]
``(A) the limitations of this subsection shall apply at the
partner rather than the partnership level,
``(B) the inversion gain of any partner for any taxable
year shall be equal to the sum of--
``(i) the partner's distributive share of inversion gain of
the partnership for such taxable year, plus
``(ii) income or gain required to be recognized for the
taxable year by the partner under section 367(a), 741, or
1001, or under any other provision of chapter 1, by reason of
the transfer during the applicable period of any partnership
interest of the partner in such partnership to the foreign
incorporated entity, and
``(C) the highest rate of tax specified in the rate
schedule applicable to the partner under chapter 1 shall be
substituted for the rate of tax under paragraph (2)(B).
``(4) Inversion gain.--For purposes of this section, the
term `inversion gain' means any income or gain required to be
recognized under section 304, 311(b), 367, 1001, or 1248, or
under any other provision of chapter 1, by reason of the
transfer during the applicable period of stock or other
properties by an acquired entity--
``(A) as part of the acquisition described in subsection
(a)(2)(A) to which subsection (b) applies, or
``(B) after such acquisition to a foreign related person.
The Secretary may provide that income or gain from the sale
of inventories or other transactions in the ordinary course
of a trade or business shall not be treated as inversion gain
under subparagraph (B) to the extent the Secretary determines
such treatment would not be inconsistent with the purposes of
this section.
``(5) Coordination with section 172 and minimum tax.--Rules
similar to the rules of paragraphs (3) and (4) of section
860E(a) shall apply for purposes of this section.
``(6) Statute of limitations.--
``(A) In general.--The statutory period for the assessment
of any deficiency attributable to the inversion gain of any
taxpayer for any pre-inversion year shall not expire before
the expiration of 3 years from the date the Secretary is
notified by the taxpayer (in such manner as the Secretary may
prescribe) of the acquisition described in subsection
(a)(2)(A) to which such gain relates and such deficiency may
be assessed before the expiration of such 3-year period
notwithstanding the provisions of any other law or rule of
law which would otherwise prevent such assessment.
``(B) Pre-inversion year.--For purposes of subparagraph
(A), the term `pre-inversion year' means any taxable year
if--
``(i) any portion of the applicable period is included in
such taxable year, and
``(ii) such year ends before the taxable year in which the
acquisition described in subsection (a)(2)(A) is completed.
``(d) Special Rules Applicable to Related Party
Transactions.--
``(1) Annual application for agreements on return
positions.--
``(A) In general.--Each acquired entity to which subsection
(b) applies shall file with the Secretary an application for
an approval agreement under subparagraph (D) for each taxable
year which includes a portion of the applicable period. Such
application shall be filed at such time and manner, and shall
contain such information, as the Secretary may prescribe.
``(B) Secretarial action.--Within 90 days of receipt of an
application under subparagraph (A) (or such longer period as
the Secretary and entity may agree upon), the Secretary
shall--
``(i) enter into an agreement described in subparagraph (D)
for the taxable year covered by the application,
``(ii) notify the entity that the Secretary has determined
that the application was filed in good faith and
substantially complies with the requirements for the
application under subparagraph (A), or
``(iii) notify the entity that the Secretary has determined
that the application was not filed in good faith or does not
substantially comply with such requirements.
If the Secretary fails to act within the time prescribed
under the preceding sentence, the entity shall be treated for
purposes of this paragraph as having received notice under
clause (ii).
``(C) Failures to comply.--If an acquired entity fails to
file an application under subparagraph (A), or the acquired
entity receives a notice under subparagraph (B)(iii), for any
taxable year, then for such taxable year--
``(i) there shall not be allowed any deduction, or addition
to basis or cost of goods sold, for amounts paid or incurred,
or losses incurred, by reason of a transaction between the
acquired entity and a foreign related person,
``(ii) any transfer or license of intangible property (as
defined in section 936(h)(3)(B)) between the acquired entity
and a foreign related person shall be disregarded, and
``(iii) any cost-sharing arrangement between the acquired
entity and a foreign related person shall be disregarded.
``(D) Approval agreement.--For purposes of subparagraph
(A), the term `approval agreement' means a prefiling, advance
pricing, or other agreement specified by the Secretary which
contains such provisions as the Secretary determines
necessary to ensure that the requirements of sections 163(j),
267(a)(3), 482, and 845, and any other provision of this
title applicable to transactions between related persons and
specified by the Secretary, are met.
``(E) Tax court review.--
``(i) In general.--The Tax Court shall have jurisdiction
over any action brought by an acquired entity receiving a
notice under subparagraph (B)(iii) to determine whether the
issuance of the notice was an abuse of discretion, but only
if the action is brought within 30 days after the date of the
mailing (determined under rules similar to section 6213) of
the notice.
``(ii) Court action.--The Tax Court shall issue its
decision within 30 days after the filing of the action under
clause (i) and may order the Secretary to issue a notice
described in subparagraph (B)(ii).
``(iii) Review.--An order of the Tax Court under this
subparagraph shall be reviewable in the same manner as any
other decision of the Tax Court.
``(2) Modifications of limitation on interest deduction.--
In the case of an acquired entity to which subsection (b)
applies, section 163(j) shall be applied--
``(A) without regard to paragraph (2)(A)(ii) thereof, and
``(B) by substituting `25 percent' for `50 percent' each
place it appears in paragraph (2)(B) thereof.
``(e) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Rules for application of subsection (a)(2).--In
applying subsection (a)(2) for purposes of subsections (a)
and (b), the following rules shall apply:
``(A) Certain stock disregarded.--There shall not be taken
into account in determining ownership for purposes of
subsection (a)(2)(B)--
``(i) stock held by members of the expanded affiliated
group which includes the foreign incorporated entity, or
``(ii) stock of such entity which is sold in a public
offering or private placement related to the acquisition
described in subsection (a)(2)(A).
``(B) Plan deemed in certain cases.--If a foreign
incorporated entity acquires directly or indirectly
substantially all of the properties of a domestic corporation
or partnership during the 4-year period beginning on the date
which is 2 years before the ownership requirements of
subsection (a)(2)(B) are met with respect to such domestic
corporation or partnership, such actions shall be treated as
pursuant to a plan.
``(C) Certain transfers disregarded.--The transfer of
properties or liabilities (including by contribution or
distribution) shall be disregarded if such transfers are part
of a plan a principal purpose of which is to avoid the
purposes of this section.
``(D) Special rule for related partnerships.--For purposes
of applying subsection (a)(2) to the acquisition of a
domestic partnership, except as provided in regulations, all
partnerships which are under common control (within the
meaning of section 482) shall be treated as 1 partnership.
``(E) Treatment of certain rights.--The Secretary shall
prescribe such regulations as may be necessary--
``(i) to treat warrants, options, contracts to acquire
stock, convertible debt instruments, and other similar
interests as stock, and
``(ii) to treat stock as not stock.
``(2) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group as defined in
section 1504(a) but without regard to section 1504(b)(3),
except that section 1504(a) shall be applied by substituting
`more than 50 percent' for `at least 80 percent' each place
it appears.
``(3) Foreign incorporated entity.--The term `foreign
incorporated entity' means any entity which is, or but for
subsection (a)(1) would be, treated as a foreign corporation
for purposes of this title.
``(4) Foreign related person.--The term `foreign related
person' means, with respect to any acquired entity, a foreign
person which--
``(A) bears a relationship to such entity described in
section 267(b) or 707(b), or
``(B) is under the same common control (within the meaning
of section 482) as such entity.
``(5) Subsequent acquisitions by unrelated domestic
corporations.--
``(A) In general.--Subject to such conditions, limitations,
and exceptions as the Secretary may prescribe, if, after an
acquisition described in subsection (a)(2)(A) to which
subsection (b) applies, a domestic corporation stock of which
is traded on an established securities market acquires
directly or indirectly any properties of one or more acquired
entities in a transaction with respect to which the
requirements of subparagraph (B) are met, this section shall
cease to apply to any such acquired entity with respect to
which such requirements are met.
``(B) Requirements.--The requirements of the subparagraph
are met with respect to a transaction involving any
acquisition described in subparagraph (A) if--
``(i) before such transaction the domestic corporation did
not have a relationship described in section 267(b) or
707(b), and was not under common control (within the meaning
of section 482), with the acquired entity, or any member of
an expanded affiliated group including such entity, and
``(ii) after such transaction, such acquired entity--
``(I) is a member of the same expanded affiliated group
which includes the domestic corporation or has such a
relationship or is
[[Page S6402]]
under such common control with any member of such group, and
``(II) is not a member of, and does not have such a
relationship and is not under such common control with any
member of, the expanded affiliated group which before such
acquisition included such entity.
``(f) Regulations.--The Secretary shall provide such
regulations as are necessary to carry out this section,
including regulations providing for such adjustments to the
application of this section as are necessary to prevent the
avoidance of the purposes of this section, including the
avoidance of such purposes through--
``(1) the use of related persons, pass-through or other
noncorporate entities, or other intermediaries, or
``(2) transactions designed to have persons cease to be (or
not become) members of expanded affiliated groups or related
persons.''.
(b) Treatment of Agreements.--
(1) Confidentiality.--
(A) Treatment as return information.--Section 6103(b)(2)
(relating to return information) is amended by striking
``and'' at the end of subparagraph (C), by inserting ``and''
at the end of subparagraph (D), and by inserting after
subparagraph (D) the following new subparagraph:
``(E) any approval agreement under section 7874(d)(1) to
which any preceding subparagraph does not apply and any
background information related to the agreement or any
application for the agreement,''.
(B) Exception from public inspection as written
determination.--Section 6110(b)(1)(B) is amended by striking
``or (D)'' and inserting ``, (D), or (E)''.
(2) Reporting.--The Secretary of the Treasury shall include
with any report on advance pricing agreements required to be
submitted after the date of the enactment of this Act under
section 521(b) of the Ticket to Work and Work Incentives
Improvement Act of 1999 (Public Law 106-170) a report
regarding approval agreements under section 7874(d)(1) of the
Internal Revenue Code of 1986. Such report shall include
information similar to the information required with respect
to advance pricing agreements and shall be treated for
confidentiality purposes in the same manner as the reports on
advance pricing agreements are treated under section
521(b)(3) of such Act.
(c) Information Reporting.--The Secretary of the Treasury
shall exercise the Secretary's authority under the Internal
Revenue Code of 1986 to require entities involved in
transactions to which section 7874 of such Code (as added by
subsection (a)) applies to report to the Secretary,
shareholders, partners, and such other persons as the
Secretary may prescribe such information as is necessary to
ensure the proper tax treatment of such transactions.
(d) Conforming Amendment.--The table of sections for
subchapter C of chapter 80 is amended by adding at the end
the following new item:
``Sec. 7874. Rules relating to inverted corporate entities.''.
(e) Transition Rule for Certain Regulated Investment
Companies and Unit Investment Trusts.--Notwithstanding
section 7874 of the Internal Revenue Code of 1986 (as added
by subsection (a)), a regulated investment company, or other
pooled fund or trust specified by the Secretary of the
Treasury, may elect to recognize gain by reason of section
367(a) of such Code with respect to a transaction under which
a foreign incorporated entity is treated as an inverted
domestic corporation under section 7874(a) of such Code by
reason of an acquisition completed after March 20, 2002, and
before January 1, 2004.
SEC. 632. EXCISE TAX ON STOCK COMPENSATION OF INSIDERS IN
INVERTED CORPORATIONS.
(a) In General.--Subtitle D is amended by adding at the end
the following new chapter:
``CHAPTER 48--STOCK COMPENSATION OF INSIDERS IN INVERTED CORPORATIONS
``Sec. 5000A. Stock compensation of insiders in inverted corporations
entities.
``SEC. 5000A. STOCK COMPENSATION OF INSIDERS IN INVERTED
CORPORATIONS.
``(a) Imposition of Tax.--In the case of an individual who
is a disqualified individual with respect to any inverted
corporation, there is hereby imposed on such person a tax
equal to 20 percent of the value (determined under subsection
(b)) of the specified stock compensation held (directly or
indirectly) by or for the benefit of such individual or a
member of such individual's family (as defined in section
267) at any time during the 12-month period beginning on the
date which is 6 months before the inversion date.
``(b) Value.--For purposes of subsection (a)--
``(1) In general.--The value of specified stock
compensation shall be--
``(A) in the case of a stock option (or other similar
right) or any stock appreciation right, the fair value of
such option or right, and
``(B) in any other case, the fair market value of such
compensation.
``(2) Date for determining value.--The determination of
value shall be made--
``(A) in the case of specified stock compensation held on
the inversion date, on such date,
``(B) in the case of such compensation which is canceled
during the 6 months before the inversion date, on the day
before such cancellation, and
``(C) in the case of such compensation which is granted
after the inversion date, on the date such compensation is
granted.
``(c) Tax To Apply Only if Shareholder Gain Recognized.--
Subsection (a) shall apply to any disqualified individual
with respect to an inverted corporation only if gain (if any)
on any stock in such corporation is recognized in whole or
part by any shareholder by reason of the acquisition referred
to in section 7874(a)(2)(A) (determined by substituting `July
10, 2002' for `March 20, 2002') with respect to such
corporation.
``(d) Exception Where Gain Recognized on Compensation.--
Subsection (a) shall not apply to--
``(1) any stock option which is exercised on the inversion
date or during the 6-month period before such date and to the
stock acquired in such exercise, and
``(2) any specified stock compensation which is sold,
exchanged, or distributed during such period in a transaction
in which gain or loss is recognized in full.
``(e) Definitions.--For purposes of this section--
``(1) Disqualified individual.--The term `disqualified
individual' means, with respect to a corporation, any
individual who, at any time during the 12-month period
beginning on the date which is 6 months before the inversion
date--
``(A) is subject to the requirements of section 16(a) of
the Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
``(B) would be subject to such requirements if such
corporation or member were an issuer of equity securities
referred to in such section.
``(2) Inverted corporation; inversion date.--
``(A) Inverted corporation.--The term `inverted
corporation' means any corporation to which subsection (a) or
(b) of section 7874 applies determined--
``(i) by substituting `July 10, 2002' for `March 20, 2002'
in section 7874(a)(2)(A), and
``(ii) without regard to subsection (b)(1)(A).
Such term includes any predecessor or successor of such a
corporation.
``(B) Inversion date.--The term `inversion date' means,
with respect to a corporation, the date on which the
corporation first becomes an inverted corporation.
``(3) Specified stock compensation.--
``(A) In general.--The term `specified stock compensation'
means payment (or right to payment) granted by the inverted
corporation (or by any member of the expanded affiliated
group which includes such corporation) to any person in
connection with the performance of services by a disqualified
individual for such corporation or member if the value of
such payment or right is based on (or determined by reference
to) the value (or change in value) of stock in such
corporation (or any such member).
``(B) Exceptions.--Such term shall not include--
``(i) any option to which part II of subchapter D of
chapter 1 applies, or
``(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
``(4) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)(3)); except
that section 1504(a) shall be applied by substituting `more
than 50 percent' for `at least 80 percent' each place it
appears.
``(f) Special Rules.--For purposes of this section--
``(1) Cancellation of restriction.--The cancellation of a
restriction which by its terms will never lapse shall be
treated as a grant.
``(2) Payment or reimbursement of tax by corporation
treated as specified stock compensation.--Any payment of the
tax imposed by this section directly or indirectly by the
inverted corporation or by any member of the expanded
affiliated group which includes such corporation--
``(A) shall be treated as specified stock compensation, and
``(B) shall not be allowed as a deduction under any
provision of chapter 1.
``(3) Certain restrictions ignored.--Whether there is
specified stock compensation, and the value thereof, shall be
determined without regard to any restriction other than a
restriction which by its terms will never lapse.
``(4) Property transfers.--Any transfer of property shall
be treated as a payment and any right to a transfer of
property shall be treated as a right to a payment.
``(5) Other administrative provisions.--For purposes of
subtitle F, any tax imposed by this section shall be treated
as a tax imposed by subtitle A.
``(g) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section.''.
(b) Denial of Deduction.--
(1) In general.--Paragraph (6) of section 275(a) is amended
by inserting ``48,'' after ``46,''.
(2) $1,000,000 limit on deductible compensation reduced by
payment of excise tax on specified stock compensation.--
Paragraph (4) of section 162(m) is amended by adding at the
end the following new subparagraph:
``(G) Coordination with excise tax on specified stock
compensation.--The dollar limitation contained in paragraph
(1) with respect to any covered employee shall be reduced
(but not below zero) by the amount of any payment (with
respect to such employee) of the tax imposed by section 5000A
[[Page S6403]]
directly or indirectly by the inverted corporation (as
defined in such section) or by any member of the expanded
affiliated group (as defined in such section) which includes
such corporation.''.
(c) Conforming Amendments.--
(1) The last sentence of section 3121(v)(2)(A) is amended
by inserting before the period ``or to any specified stock
compensation (as defined in section 5000A) on which tax is
imposed by section 5000A''.
(2) The table of chapters for subtitle D is amended by
adding at the end the following new item:
``Chapter 48. Stock compensation of insiders in inverted
corporations.''.
(d) Effective Date.--The amendments made by this section
shall take effect on July 11, 2002; except that periods
before such date shall not be taken into account in applying
the periods in subsections (a) and (e)(1) of section 5000A of
the Internal Revenue Code of 1986, as added by this section.
SEC. 633. REINSURANCE OF UNITED STATES RISKS IN FOREIGN
JURISDICTIONS.
(a) In General.--Section 845(a) (relating to allocation in
case of reinsurance agreement involving tax avoidance or
evasion) is amended by striking ``source and character'' and
inserting ``amount, source, or character''.
(b) Effective Date.--The amendments made by this section
shall apply to any risk reinsured after April 11, 2002.
Subtitle D--Imposition of Customs User Fees
SEC. 641. CUSTOMS USER FEES.
Section 13031(j)(3) of the Consolidated Omnibus Budget
Reconciliation Act of 1985 (19 U.S.C. 58c(j)(3)) is amended
by striking ``September 30, 2003'' and inserting ``September
30, 2013''.
TITLE VII--SUNSET
SEC. 701. SUNSET.
(a) In General.--Except as otherwise provided, the
provisions of, and amendments made, by this Act shall not
apply to taxable years beginning after December 31, 2012, and
the Internal Revenue Code of 1986 shall be applied and
administered to such years as if such amendments had never
been enacted.
(b) Exceptions.--Subsection (a) shall not apply to the
following provisions of, and amendments made, by this Act:
(1) Title III.
(2) Title VI.
______
SA 620. Ms. LANDRIEU proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT ADDED
TO GENERAL BUSINESS CREDIT.
(a) Ready Reserve-National Guard Credit.--Subpart D of part
IV of subchapter A of chapter 1 (relating to business-related
credits) is amended by adding at the end the following:
``SEC. 45G. READY RESERVE-NATIONAL GUARD EMPLOYEE CREDIT.
``(a) General Rule.--For purposes of section 38, the Ready
Reserve-National Guard employee credit determined under this
section for any taxable year is an amount equal to 50 percent
of the actual compensation amount for such taxable year.
``(b) Definition of Actual Compensation Amount.--For
purposes of this section, the term `actual compensation
amount' means the amount of compensation paid or incurred by
an employer with respect to a Ready Reserve-National Guard
employee on any day during a taxable year when the employee
was absent from employment for the purpose of performing
qualified active duty.
``(c) Limitations.--
``(1) Maximum period for credit per employee.--The maximum
period with respect to which the credit may be allowed with
respect to any Ready Reserve-National Guard employee shall
not exceed the 12-month period beginning on the first day
such credit is so allowed with respect to such employee.
``(2) Days other than work days.--No credit shall be
allowed with respect to a Ready Reserve-National Guard
employee who performs qualified active duty on any day on
which the employee was not scheduled to work (for reason
other than to participate in qualified active duty).
``(d) Definitions.--For purposes of this section--
``(1) Qualified active duty.--The term `qualified active
duty' means--
``(A) active duty, other than the training duty specified
in section 10147 of title 10, United States Code (relating to
training requirements for the Ready Reserve), or section
502(a) of title 32, United States Code (relating to required
drills and field exercises for the National Guard), in
connection with which an employee is entitled to reemployment
rights and other benefits or to a leave of absence from
employment under chapter 43 of title 38, United States Code,
and
``(B) hospitalization incident to such duty.
``(2) Compensation.--The term `compensation' means any
remuneration for employment, whether in cash or in kind,
which is paid or incurred by a taxpayer and which is
deductible from the taxpayer's gross income under section
162(a)(1).
``(3) Ready reserve-national guard employee.--The term
`Ready Reserve-National Guard employee' means an employee who
is a member of the Ready Reserve or of the National Guard.
``(4) National guard.--The term `National Guard' has the
meaning given such term by section 101(c)(1) of title 10,
United States Code.
``(5) Ready reserve.--The term `Ready Reserve' has the
meaning given such term by section 10142 of title 10, United
States Code.''.
(b) Credit To Be Part of General Business Credit.--
Subsection (b) of section 38 (relating to general business
credit) is amended by striking ``plus'' at the end of
paragraph (14), by striking the period at the end of
paragraph (15) and inserting ``, plus'', and by adding at the
end the following:
``(16) the Ready Reserve-National Guard employee credit
determined under section 45G(a).''.
(c) Conforming Amendment.--The table of sections for
subpart D of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 45F the
following:
``Sec. 45G. Ready Reserve-National Guard employee credit.''.
(d) Revision of Partial Exclusion of Dividends Received By
Individuals.--Section 116(a)(2)(B) of the Internal Revenue
Code of 1986, as added by section 201, is amended by striking
``2007'' and inserting ``2008''.
(e) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after the date of the
enactment of this Act.
______
SA 621. Ms. LANDRIEU proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
At the end of subtitle C of title V add the following:
SEC. ____. RENEWAL COMMUNITY EMPLOYERS MAY QUALIFY FOR
EMPLOYMENT CREDIT BY EMPLOYING RESIDENTS OF
CERTAIN OTHER RENEWAL COMMUNITIES.
(a) In General.--Section 1400H(b)(2) (relating to
modification) is amended by striking ``and'' at the end of
paragraph (1), by striking the period at the end of paragraph
(2) and inserting ``, and'', and by adding at the end the
following new paragraph:
``(3) subsection (d)(1)(B) thereof shall be applied by
substituting `such renewal community, an adjacent renewal
community within the same State as such renewal community, or
a renewal community within such State which is within 5 miles
of any border of such renewal community' for `such
empowerment zone'.''.
(b) Reduction of Acceleration of Top Rate Reduction In
Individual Income Tax Rates.--Notwithstanding the amendment
made by section 102(a) of this Act, in lieu of the percent
specified in the last column of the table in paragraph (2) of
section 1(i) of the Internal Revenue Code of 1986, as amended
by such section 102(a), for taxable years beginning during
calendar year 2003, 35.1% shall be substituted for such year.
(c) Effective Dates.--
(1) The amendments made by subsection (a) shall take effect
as if included in the amendment made by section 101(a) of the
Community Renewal Tax Relief Act of 2000.
(2) Subsection (b) shall take effect on the date of
enactment of this Act.
______
SA 622. Mr. ENSIGN proposed an amendment to the bill S. 1054, to
provide for reconciliation pursuant to section 201 of the concurrent
resolution on the budget for fiscal year 2004; as follows:
On page 281, between lines 2 and 3, insert the following:
SEC. ____. TOLL TAX ON EXCESS QUALIFIED FOREIGN DISTRIBUTION
AMOUNT.
(a) In General.--Subpart F of part III of subchapter N of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 965. TOLL TAX IMPOSED ON EXCESS QUALIFIED FOREIGN
DISTRIBUTION AMOUNT.
``(a) Toll Tax Imposed on Excess Qualified Foreign
Distribution Amount.--If a corporation elects the application
of this section, a tax shall be imposed on the taxpayer in an
amount equal to 5.25 percent of--
``(1) the taxpayer's excess qualified foreign distribution
amount, and
``(2) the amount determined under section 78 which is
attributable to such excess qualified foreign distribution
amount.
Such tax shall be imposed in lieu of the tax imposed under
section 11 or 55 on the amounts described in paragraphs (1)
and (2) for such taxable year.
``(b) Excess Qualified Foreign Distribution Amount.--For
purposes of this section--
``(1) In general.--The term `excess qualified foreign
distribution amount' means the excess (if any) of--
``(A) dividends received by the taxpayer during the taxable
year which are--
``(i) from 1 or more corporations which are controlled
foreign corporations in which the taxpayer is a United States
shareholder on the date such dividends are paid, and
``(ii) described in a domestic reinvestment plan approved
by the taxpayer's president, chief executive officer, or
comparable official before the payment of such dividends
[[Page S6404]]
and subsequently approved by the taxpayer's board of
directors, management committee, executive committee, or
similar body, which plan shall provide for the reinvestment
of such dividends in the United States, including as a source
for the funding of worker hiring and training;
infrastructure; research and development; capital
investments; or the financial stabilization of the
corporation for the purposes of job retention or creation,
over
``(B) the base dividend amount.
``(2) Base dividend amount.--The term `base dividend
amount' means an amount designated under subsection (c)(7),
but not less than the average amount of dividends received
during the fixed base period from 1 or more corporations
which are controlled foreign corporations in which the
taxpayer is a United States shareholder on the date such
dividends are paid.
``(3) Fixed base period.--
``(A) In general.--The term `fixed base period' means each
of 3 taxable years which are among the 5 most recent taxable
years of the taxpayer ending on or before December 31, 2002,
determined by disregarding--
``(i) the 1 taxable year for which the taxpayer had the
highest amount of dividends from 1 or more corporations which
are controlled foreign corporations relative to the other 4
taxable years, and
``(ii) the 1 taxable year for which the taxpayer had the
lowest amount of dividends from such corporations relative to
the other 4 taxable years.
``(B) Shorter period.--If the taxpayer has fewer than 5
taxable years ending on or before December 31, 2002, then in
lieu of applying subparagraph (A), the fixed base period
shall mean such shorter period representing all of the
taxable years of the taxpayer ending on or before December
31, 2002.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Dividends.--The term `dividend' means a dividend as
defined in section 316, except that the term shall also
include amounts described in section 951(a)(1)(B), and shall
exclude amounts described in sections 78 and 959.
``(2) Controlled foreign corporations and united states
shareholders.--The term `controlled foreign corporation'
shall have the same meaning as under section 957(a) and the
term `United States shareholder' shall have the same meaning
as under section 951(b).
``(3) Foreign tax credits.--The amount of any income, war,
profits, or excess profit taxes paid (or deemed paid under
sections 902 and 960) or accrued by the taxpayer with respect
to the excess qualified foreign distribution amount for which
a credit would be allowable under section 901 in the absence
of this section, shall be reduced by 85 percent.
``(4) Foreign tax credit limitation.--For all purposes of
section 904, there shall be disregarded 85 percent of--
``(A) the excess qualified foreign distribution amount,
``(B) the amount determined under section 78 which is
attributable to such excess qualified foreign distribution
amount, and
``(C) the amounts (including assets, gross income, and
other relevant bases of apportionment) which are attributable
to the excess qualified foreign distribution amount which
would, determined without regard to this section, be used to
apportion the expenses, losses, and deductions of the
taxpayer under section 861 and 864 in determining its taxable
income from sources without the United States.
For purposes of applying subparagraph (C), the principles of
section 864(e)(3)(A) shall apply.
``(5) Treatment of acquisitions and dispositions.--Rules
similar to the rules of section 41(f)(3) shall apply in the
case of acquisitions or dispositions of controlled foreign
corporations occurring on or after the first day of the
earliest taxable year taken into account in determining the
fixed base period.
``(6) Treatment of consolidated groups.--Members of an
affiliated group of corporations filing a consolidated return
under section 1501 shall be treated as a single taxpayer in
applying the rules of this section.
``(7) Designation of dividends.--Subject to subsection
(b)(2), the taxpayer shall designate the particular dividends
received during the taxable year from 1 or more corporations
which are controlled foreign corporations in which it is a
United States shareholder which are dividends excluded from
the excess qualified foreign distribution amount. The total
amount of such designated dividends shall equal the base
dividend amount.
``(8) Treatment of expenses, losses, and deductions.--Any
expenses, losses, or deductions of the taxpayer allowable
under subchapter B--
``(A) shall not be applied to reduce the amounts described
in subsection (a)(1), and
``(B) shall be applied to reduce other income of the
taxpayer (determined without regard to the amounts described
in subsection (a)(1)).
``(d) Election.--
``(1) In general.--An election under this section shall be
made on the taxpayer's timely filed income tax return for the
taxable year (determined by taking extensions into account)
ending 120 days or more after the date of the enactment of
this section, and, once made, may be revoked only with the
consent of the Secretary.
``(2) All controlled foreign corporations.--The election
shall apply to all corporations which are controlled foreign
corporations in which the taxpayer is a United States
shareholder during the taxable year.
``(3) Consolidated groups.--If a taxpayer is a member of an
affiliated group of corporations filing a consolidated return
under section 1501 for the taxable year, an election under
this section shall be made by the common parent of the
affiliated group which includes the taxpayer, and shall apply
to all members of the affiliated group.
``(e) Regulations.--The Secretary shall prescribe such
regulations as may be necessary and appropriate to carry out
the purposes of this section, including regulations under
section 55 and regulations addressing corporations which,
during the fixed base period or thereafter, join or leave an
affiliated group of corporations filing a consolidated
return.''.
(b) Conforming Amendment.--The table of sections for
subpart F of part III of subchapter N of chapter 1 is amended
by adding at the end the following new item:
``Sec. 965. Toll tax imposed on excess qualified foreign distribution
amount.''.
(c) Effective Date.--Except as otherwise provided, the
amendments made by this section, other than the amendment
made by subsection (d), shall apply only to the first taxable
year of the electing taxpayer ending 120 days or more after
the date of the enactment of this Act.
(e) Termination of Rehabilitation Credit.--Section 47
(relating to rehabilitation credit) is amended by adding at
the end the following new subsection:
``(e) Termination.--This section shall not apply to
expenditures incurred after December 31, 2003.''.
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Senate amendment submitted
May 14, 2003