To provide emergency funding for food aid to HIV/AIDS affected populations in sub-Saharan Africa.

TEXT OF AMENDMENTS

SA 623. 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:

On page 281, between lines 2 and 3, insert the following:

SEC. ____. $2,500,000,000 INCREASE IN NEW MARKETS TAX CREDIT
FOR 2003.

(a) In General.--The table contained in paragraph (1) of
section 45D(f) (relating to national limitation on amount of
investments designated) is amended by redesignating
subparagraphs (C) and (D) as subparagraphs (D) and (E),
respectively, and by striking subparagraph (B) and inserting
the following new subparagraphs:
``(B) $1,500,000,000 for 2002,
``(C) $4,000,000,000 for 2003,''.
(b) Allocation Rules.--Section 45D(f)(2) (relating to
allocation of limitation) is amended by adding at the end the
following new flush sentence:

``For purposes of the preceding sentence, $2,500,000,000 of
the new markets tax credit limitation for 2003 shall be
allocated within 18 months after the date of the enactment of
the Jobs and Growth Tax Relief Reconciliation Act of 2003 by
the Community Development Financial Institutions Fund.''.
(c) Effective Date.--The amendments made by this section
shall apply to calendar years after 2002.
On page 19, lines 12 and 13, strike ``(20 percent in the
case of taxable years beginning after 2007)'' and insert
``(15 percent in the case of taxable years beginning after
2007 and 20 percent in the case of taxable years beginning
after 2008)''.
On page 26, lines 18 and 19, strike ``(80 percent in the
case of taxable years beginning after 2007)'' and insert
``(85 percent in the case of taxable years beginning after
2007 and 80 percent in the case of taxable years beginning
after 2008)''.
On page 26, lines 21 and 22, strike ``(80 percent in the
case of taxable years beginning after 2007)'' and insert
``(85 percent in the case of taxable years beginning after
2007 and 80 percent in the case of taxable years beginning
after 2008)''.
______

SA 624. Mr. BAUCUS proposed an amendment SA 555 proposed by Mr.
Grassley 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 2, strike line 13 and insert:
(b) Increase in Penalties.--
(1) Attempt to evade or defeat tax.--Section 7201 is
amended--
(A) by striking ``$100,000'' and inserting ``$250,000'',
(B) by striking ``$500,000'' and inserting ``$1,000,000'',
and
(C) by striking ``5 years'' and inserting ``10 years''.
(2) Willful failure to file return, supply information, or
pay tax.--Section 7203 is amended--
(A) in the first sentence--
(i) by striking ``misdemeanor'' and inserting ``felony'',
and
(ii) by striking ``1 year'' and inserting ``10 years'', and
(B) by striking the third sentence.
(3) Fraud and false statements.--Section 7206(a) (as
redesignated by subsection (a)) is amended--
(A) by striking ``$100,000'' and inserting ``$250,000'',
(B) by striking ``$500,000'' and inserting ``$1,000,000'',
and
(C) by striking ``3 years'' and inserting ``5 years''.
(c) Effective Date.--The amendments made by

*   *   *   *   *

______

SA 625. Mr. HATCH (for himself, Mr. Breaux, Mrs. Lincoln, Mr. Smith,
and Mr. Allard) 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 title V add the following:

Subtitle D--Provisions Relating To S Corporation Reform and
Simplification

PART I--MAXIMUM NUMBER OF SHAREHOLDERS OF AN S CORPORATION

SEC. 541. MEMBERS OF FAMILY TREATED AS 1 SHAREHOLDER.

(a) In General.--Paragraph (1) of section 1361(c) (relating
to special rules for applying subsection (b)) is amended to
read as follows:
``(1) Members of family treated as 1 shareholder.--
``(A) In general.--For purpose of subsection (b)(1)(A)--
``(i) except as provided in clause (ii), a husband and wife
(and their estates) shall be treated as 1 shareholder, and
``(ii) in the case of a family with respect to which an
election is in effect under subparagraph (E), all members of
the family shall be treated as 1 shareholder.
``(B) Members of the family.--For purpose of subparagraph
(A)(ii), the term `members of the family' means the common
ancestor, lineal descendants of the common ancestor and the
spouses of such lineal descendants or common ancestor.
``(C) Common ancestor.--For purposes of this paragraph, an
individual shall not be considered a common ancestor if, as
of the later of the effective date of this paragraph or the
time the election under section 1362(a) is made, the
individual is more than 6 generations removed from the
youngest generation of shareholders.
``(D) Effect of adoption, etc.--In determining whether any
relationship specified in subparagraph (B) or (C) exists, the
rules of section 152(b)(2) shall apply.
``(E) Election.--An election under subparagraph (A)(ii)--
``(i) must be made with the consent of all persons who are
shareholders (including those that are family members) in the
corporation on the day the election is made,
``(ii) in the case of--

``(I) an electing small business trust, shall be made by
the trustee of the trust, and
``(II) a qualified subchapter S trust, shall be made by the
beneficiary of the trust,

``(iii) under regulations, shall remain in effect until
terminated, and
``(iv) shall apply only with respect to 1 family in any
corporation.''.
(b) Relief From Inadvertent Invalid Election or
Termination.--Section 1362(f) (relating to inadvertent
invalid elections or terminations), as amended by this Act,
is amended--
(1) by inserting ``or under section 1361(c)(1)(A)(ii)''
after ``section 1361(b)(3)(B)(ii)'' in paragraph (1), and
(2) by inserting ``or under section 1361(c)(1)(E)(iii)''
after ``section 1361(b)(3)(C)'' in paragraph (1)(B).
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.

SEC. 542. INCREASE IN NUMBER OF ELIGIBLE SHAREHOLDERS TO 100.

(a) In General.--Section 1361(b)(1)(A) (defining small
business corporation) is amended by striking ``75'' and
inserting ``100''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.

SEC. 543. NONRESIDENT ALIENS ALLOWED AS BENEFICIARIES OF AN
ELECTING SMALL BUSINESS TRUST.

(a) In General.--Section 1361(e)(1)(A)(i)(I) is amended by
inserting ``(including a nonresident alien individual)''
after ``individual''.
(b) Conforming Amendment.--Clause (v) of section
1361(c)(2)(B) is amended by adding at the end the following
new sentence: ``This clause shall not apply for purposes of
subsection (b)(1)(C).''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.

PART II--TERMINATION OF ELECTION AND ADDITIONS TO TAX DUE TO PASSIVE
INVESTMENT INCOME

SEC. 544. MODIFICATIONS TO PASSIVE INCOME RULES.

(a) Increased Percentage Limit.--
(1) In general.--Subsection (a)(2) of section 1375
(relating to tax imposed when passive investment income of
corporation having accumulated earnings and profits exceeds
25 percent of gross receipts) is amended by striking ``25
percent'' and inserting ``60 percent''.

[[Page S6519]]

(2) Conforming amendments.--
(A) Section 26(b)(2)(J) is amended by striking ``25
percent'' and inserting ``60 percent''.
(B) Section 1362(d)(3)(A)(i)(II) is amended by striking
``25 percent'' and inserting ``60 percent''.
(C) The heading for paragraph (3) of section 1362(d) is
amended by striking ``25 percent'' and inserting ``60
percent''.
(D) Section 1375(b)(1)(A)(i) is amended by striking ``25
percent'' and inserting ``60 percent''.
(E) The heading for section 1375 is amended by striking
``25 PERCENT'' and inserting ``60 PERCENT''.
(F) The table of sections for part III of subchapter S of
chapter 1 is amended by striking ``25 percent'' in the item
relating to section 1375 and inserting ``60 percent''.
(b) Capital Gain Not Treated as Passive Investment
Income.--Section 1362(d)(3) is amended--
(1) by striking ``annuities,'' and all that follows in
subparagraph (C)(i) and inserting ``and annuities.'', and
(2) by striking subparagraphs (C)(iv) and (D) and by
redesignating subparagraph (E) as subparagraph (D).
(c) Conforming amendments.--Section 1375(d) is amended by
striking ``subchapter C'' both places it appears and
inserting ``accumulated''.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.

PART III--TREATMENT OF S CORPORATION SHAREHOLDERS

SEC. 545. TRANSFER OF SUSPENDED LOSSES INCIDENT TO DIVORCE.

(a) In General.--Section 1366(d) (relating to special rules
for losses and deductions) is amended by adding at the end
the following new paragraph:
``(4) Transfer of suspended losses and deductions when
stock is transferred incident to divorce.--For purposes of
paragraph (2), the transfer of any shareholder's stock in an
S corporation incident to a decree of divorce shall include
any loss or deduction described in such paragraph
attributable to such stock.''.
(b) Effective Date.--The amendment made by this section
shall apply to transfers in taxable years beginning after
December 31, 2003.

SEC. 546. USE OF PASSIVE ACTIVITY LOSS AND AT-RISK AMOUNTS BY
QUALIFIED SUBCHAPTER S TRUST INCOME
BENEFICIARIES.

(a) In General.--Section 1361(d)(1) (relating to special
rule for qualified subchapter S trust) is amended--
(1) by striking ``and'' at the end of subparagraph (A),
(2) by striking the period at the end of subparagraph (B)
and inserting ``, and'', and
(3) by adding at the end the following new subparagraph:
``(C) for purposes of applying sections 465 and 469(g) to
the beneficiary of the trust, the disposition of the S
corporation stock by the trust shall be treated as a
disposition by such beneficiary.''.
(b) Effective Date.--The amendments made by this section
shall apply to transfers in taxable years beginning after
December 31, 2003.

SEC. 547. DISREGARD OF UNEXERCISED POWERS OF APPOINTMENT IN
DETERMINING POTENTIAL CURRENT BENEFICIARIES OF
ESBT.

(a) In General.--Section 1361(e)(2) (defining potential
current beneficiary) is amended by inserting ``(determined
without regard to any unexercised (in whole or in part) power
of appointment during such period)'' after ``of the trust''
in the first sentence.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.

SEC. 548. CLARIFICATION OF ELECTING SMALL BUSINESS TRUST
DISTRIBUTION RULES.

(a) In General.--Section 641(c)(1) (relating to special
rules for taxation of electing small business trusts) is
amended--
(1) by striking ``and'' at the end of subparagraph (A),
(2) by redesignating subparagraph (B) as subparagraph (C),
and
(3) by inserting after subparagraph (A) the following new
subparagraph:
``(B) any distribution attributable to the portion treated
as a separate trust shall be treated separately from any
distribution attributable to the portion not so treated,
and''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.

PART IV--PROVISIONS RELATING TO BANKS

SEC. 549. SALE OF STOCK IN IRA RELATING TO S CORPORATION
ELECTION EXEMPT FROM PROHIBITED TRANSACTION
RULES.

(a) In General.--Section 4975(d) (relating to exemptions)
is amended by striking ``or'' at the end of paragraph (14),
by striking the period at the end of paragraph (15) and
inserting ``; or'', and by adding at the end the following
new paragraph:
``(16) a sale of stock held by a trust which constitutes an
individual retirement account under section 408(a) to the
individual for whose benefit such account is established if
such sale is pursuant to an election under section
1362(a).''.
(b) Effective Date.--The amendments made by this section
shall apply to sales of stock held by individual retirement
accounts on the date of the enactment of this Act.

SEC. 550. EXCLUSION OF INVESTMENT SECURITIES INCOME FROM
PASSIVE INCOME TEST FOR BANK S CORPORATIONS.

(a) In General.--Section 1362(d)(3) (relating to where
passive investment income exceeds certain percentage of gross
receipts for 3 consecutive taxable years and corporation has
accumulated earnings and profits), as amended by this Act, is
amended by adding at the end the following new subparagraph:
``(E) Exception for banks; etc.--In the case of a bank (as
defined in section 581), a bank holding company (as defined
in section 246A(c)(3)(B)(ii)), or a qualified subchapter S
subsidiary which is a bank, the term `passive investment
income' shall not include--
``(i) interest income earned by such bank, bank holding
company, or qualified subchapter S subsidiary, or
``(ii) dividends on assets required to be held by such
bank, bank holding company, or qualified subchapter S
subsidiary to conduct a banking business, including stock in
the Federal Reserve Bank, the Federal Home Loan Bank, or the
Federal Agricultural Mortgage Bank or participation
certificates issued by a Federal Intermediate Credit Bank.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.

SEC. 551. TREATMENT OF QUALIFYING DIRECTOR SHARES.

(a) In General.--Section 1361 (defining S corporation) is
amended by adding at the end the following new subsection:
``(f) Treatment of Qualifying Director Shares.--
``(1) In general.--For purposes of this subchapter--
``(A) qualifying director shares shall not be treated as a
second class of stock, and
``(B) no person shall be treated as a shareholder of the
corporation by reason of holding qualifying director shares.
``(2) Qualifying director shares defined.--For purposes of
this subsection, the term `qualifying director shares' means
any shares of stock in a bank (as defined in section 581) or
in a bank holding company registered as such with the Federal
Reserve System--
``(i) which are held by an individual solely by reason of
status as a director of such bank or company or its
controlled subsidiary; and
``(ii) which are subject to an agreement pursuant to which
the holder is required to dispose of the shares of stock upon
termination of the holder's status as a director at the same
price as the individual acquired such shares of stock.
``(3) Distributions.--A distribution (not in part or full
payment in exchange for stock) made by the corporation with
respect to qualifying director shares shall be includible as
ordinary income of the holder and deductible to the
corporation as an expense in computing taxable income under
section 1363(b) in the year such distribution is received.''.
(b) Conforming Amendment.--Section 1366(a) is amended by
adding at the end the following new paragraph:
``(3) Allocation with respect to qualifying director
shares.--The holders of qualifying director shares (as
defined in section 1361(f)) shall not, with respect to such
shares of stock, be allocated any of the items described in
paragraph (1).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.

PART V--QUALIFIED SUBCHAPTER S SUBSIDIARIES

SEC. 552. RELIEF FROM INADVERTENTLY INVALID QUALIFIED
SUBCHAPTER S SUBSIDIARY ELECTIONS AND
TERMINATIONS.

(a) In General.--Section 1362(f) (relating to inadvertent
invalid elections or terminations) is amended--
(1) by inserting ``or under section 1361(b)(3)(B)(ii)''
after ``subsection (a)''in paragraph (1),
(2) by inserting ``or under section 1361(b)(3)(C)'' after
``subsection (d)'' in paragraph (1)(B),
(3) by inserting ``or a qualified subchapter S subsidiary,
as the case may be'' after ``small business corporation'' in
paragraph (3)(A),
(4) by inserting ``or a qualified subchapter S subsidiary,
as the case may be'' after ``S corporation'' in paragraph
(4), and
(5) by inserting ``or a qualified subchapter S subsidiary,
as the case may be'' after ``S corporation'' in the matter
following paragraph (4).
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.

SEC. 553. INFORMATION RETURNS FOR QUALIFIED SUBCHAPTER S
SUBSIDIARIES.

(a) In General.--Section 1361(b)(3)(A) (relating to
treatment of certain wholly owned subsidiaries) is amended by
inserting ``and in the case of information returns required
under part III of subchapter A of chapter 61'' after
``Secretary''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.

PART VI--ADDITIONAL PROVISIONS

SEC. 554. ELIMINATION OF ALL EARNINGS AND PROFITS
ATTRIBUTABLE TO PRE-1983 YEARS.

(a) In General.--Subsection (a) of section 1311 of the
Small Business Job Protection Act of 1996 is amended to read
as follows:
``(a) In General.--If a corporation was an electing small
business corporation under

[[Page S6520]]

subchapter S of chapter 1 of the Internal Revenue Code of
1986 for any taxable year beginning before January 1, 1983,
the amount of such corporation's accumulated earnings and
profits (as of the beginning of the first taxable year
beginning after December 31, 2003) shall be reduced by an
amount equal to the portion (if any) of such accumulated
earnings and profits which were accumulated in any taxable
year beginning before January 1, 1983, for which such
corporation was an electing small business corporation under
such subchapter S.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.
______

SA 626. Mr. HATCH 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, add the following:

TITLE I--REIT CORRECTIONS

SEC. 101. REVISIONS TO REIT ASSET TEST.

(a) Expansion of Straight Debt Safe Harbor.--Section 856
(defining real estate investment trust) is amended--
(1) in subsection (c) by striking paragraph (7), and
(2) by adding at the end the following new subsection:
``(m) Safe Harbor in Applying Subsection (c)(4)--
``(1) In general.--In applying subclause (III) of
subsection (c)(4)(B)(iii), except as otherwise determined by
the Secretary in regulations, the following shall not be
considered securities held by the trust:
``(A) Straight debt securities of an issuer which meet the
requirements of paragraph (2).
``(B) Any loan to an individual or an estate.
``(C) Any section 467 rental agreement (as defined in
section 467(d)), other than with a person described in
subsection (d)(2)(B).
``(D) Any obligation to pay rents from real property (as
defined in subsection (d)(1)).
``(E) Any security issued by a State or any political
subdivision thereof, the District of Columbia, a foreign
government or any political subdivision thereof, or the
Commonwealth of Puerto Rico, but only if the determination of
any payment received or accrued under such security does not
depend in whole or in part on the profits of any entity not
described in this subparagraph or payments on any obligation
issued by such an entity.
``(F) Any security issued by a real estate investment
trust.
``(G) Any other arrangement as determined by the Secretary.
``(2) Special rules relating to straight debt securities.--
``(A) In general.--For purposes of paragraph (1)(A),
securities meet the requirements of this paragraph if such
securities are straight debt, as defined in section
1361(c)(5) (without regard to subparagraph (B)(iii) thereof).
``(B) Special rules relating to certain contingencies.--For
purposes of subparagraph (A), any interest or principal shall
not be treated as failing to satisfy section 1361(c)(5)(B)(i)
solely by reason of the fact that the time of payment of such
interest or principal is subject to a contingency, but only
if--
``(i) any such contingency does not have the effect of
changing the effective yield to maturity, as determined under
section 1272, other than a change in the annual yield to
maturity which either--
``(I) does not exceed the greater of 1/4 of 1 percent or 5
percent of the annual yield to maturity, or
``(II) results solely from a default or the exercise of a
prepayment right by the issuer of the debt, or
``(ii) neither the aggregate issue price nor the aggregate
face amount of the issuer's debt instruments held by the
trust exceeds $1,000,000 and not more than 12 months of
unaccrued interest can be required to be prepaid thereunder.
``(C) Special rules relating to corporate or partnership
issuers.--In the case of an issuer which is a corporation or
a partnership, securities that otherwise would be described
in paragraph (1)(A) shall be considered not to be so
described if the trust holding such securities and any of its
controlled taxable REIT subsidiaries (as defined in
subsection (d)(8)(A)(iv)) hold any securities of the issuer
which--
``(i) are not described in paragraph (1) (prior to the
application of paragraph (1)(C)), and
``(ii) have an aggregate value greater than 1 percent of
the issuer's outstanding securities.
``(3) Look-through rule for partnership securities.--
``(A) In general.--For purposes of applying subclause (III)
of subsection (c)(4)(B)(iii)--
``(i) a trust's interest as a partner in a partnership (as
defined in section 7701(a)(2)) shall not be considered a
security, and
``(ii) the trust shall be deemed to own its proportionate
share of each of the assets of the partnership.
``(B) Determination of trust's interest in partnership
assets.--For purposes of subparagraph (A), with respect to
any taxable year beginning after the date of the enactment of
this subparagraph--
``(i) the trust's interest in the partnership assets shall
be the trust's proportionate interest in any securities
issued by the partnership (determined without regard to
subparagraph (A)(i) and paragraph (4), but not including
securities described in paragraph (1)), and
``(ii) the value of any debt instrument shall be the
adjusted issue price thereof, as defined in section
1272(a)(4).
``(4) Certain partnership debt instruments not treated as a
security.--For purposes of applying subclause (III) of
subsection (c)(4)(B)(iii).--
``(A) any debt instrument issued by a partnership and not
described in paragraph (1) shall not be considered a security
to the extent of the trust's interest as a partner in the
partnership, and
``(B) any debt instrument issued by a partnership and not
described in paragraph (1) shall not be considered a security
if at least 75 percent of the partnership's gross income
(excluding gross income from prohibited transactions) is
derived from sources referred to in subsection (c)(3).
``(5) Secretarial guidance.--The Secretary is authorized to
provide guidance (including through the issuance of a written
determination, as defined in section 6110(b)) that an
arrangement shall not be considered a security held by the
trust for purposes of applying subclause (III) of subsection
(c)(4)(B)(iii) notwithstanding that such arrangement
otherwise could be considered a security under subparagraph
(F) of subsection (c)(5).''.

SEC. 102. CLARIFICATION OF APPLICATION OF LIMITED RENTAL
EXCEPTION.

Subparagraph (A) of section 856(d)(8) (relating to special
rules for taxable REIT subsidiaries) is amended to read as
follows:
``(A) Limited rental exception.--
``(i) In general.--The requirements of this subparagraph
are met with respect to any property if at least 90 percent
of the leased space of the property is rented to persons
other than taxable REIT subsidiaries of such trust and other
than persons described in paragraph (2)(B).
``(ii) Rents must be substantially comparable.--Clause (i)
shall apply only to the extent that the amounts paid to the
trust as rents from real property (as defined in paragraph
(1) without regard to paragraph (2)(B)) from such property
are substantially comparable to such rents paid by the other
tenants of the trust's property for comparable space.
``(iii) Times for testing rent comparability.--The
substantial comparability requirement of clause (ii) shall be
treated as met with respect to a lease to a taxable REIT
subsidiary of the trust if such requirement is met under the
terms of the lease--
``(I) at the time such lease is entered into,
``(II) at the time of each extension of the lease,
including a failure to exercise a right to terminate, and
``(III) at the time of any modification of the lease
between the trust and the taxable REIT subsidiary if the rent
under such lease is effectively increased pursuant to such
modification.
With respect to subclause (III), if the taxable REIT
subsidiary of the trust is a controlled taxable REIT
subsidiary of the trust, the term `rents from real property'
shall not in any event include rent under such lease to the
extent of the increase in such rent on account of such
modification.
``(iv) Controlled taxable Reit subsidiary.--For purposes of
clause (iii), the term `controlled taxable REIT subsidiary'
means, with respect to any real estate investment trust, any
taxable REIT subsidiary of such trust if such trust owns
directly or indirectly--
``(I) stock possessing more than 50 percent of the total
voting power of the outstanding stock of such subsidiary, or
``(II) stock having a value of more than 50 percent of the
total value of the outstanding stock of such subsidiary.
``(v) Continuing qualifications based on third party
actions.--If the requirements of clause (i) are met at a time
referred to in clause (iii), such requirements shall continue
to be treated as met so long as there is no increase in the
space leased to any taxable REIT subsidiary of such trust or
to any person described in paragraph (2)(B).
``(vi) Correction period.--If there is an increase referred
to in clause (v) during any calendar quarter with respect to
any property, the requirements of clause (iii) shall be
treated as met during the quarter and the succeeding quarter
if such requirements are met at the close of such succeeding
quarter.''.

SEC. 103. DELETION OF CUSTOMARY SERVICES EXCEPTION.

Subparagraph (B) of section 857(b)(7) (relating to
redetermined rents) is amended by striking clause (ii) and by
redesignating clauses (iii), (iv), (v), (vi), and (vii) as
clauses (ii), (iii), (iv), (v), and (vi), respectively.

SEC. 104. CONFORMITY WITH GENERAL HEDGING DEFINITION.

(a) Definition.--Subparagraph (G) of section 856(c)(5)
(relating to treatment of certain hedging instruments) is
amended to read as follows:
``(G) Treatment of certain hedging instruments--Except to
the extent provided by regulations, any income of a real
estate investment trust from a hedging transaction (as
defined in clause (ii) or (iii) of section 1221(b)(2)(A))
which is clearly identified pursuant to section 1221(a)(7),
including gain from the sale or disposition of such a
transaction, shall not constitute gross income

[[Page S6521]]

under paragraph (2) to the extent that the transaction hedges
any indebtedness incurred or to be incurred by the trust to
acquire or carry real estate assets.''

SEC. 105. CONFORMITY WITH REGULATED INVESTMENT COMPANY RULES.

Clause (i) of section 857(b)(5)(A) (relating to imposition
of tax in case of failure to meet certain requirements) is
amended by striking ``90 percent'' and inserting ``95
percent''.

SEC. 106. PROHIBITED TRANSACTIONS PROVISIONS.

(a) Expansion of Prohibited Transaction Safe Harbor.--
Section 857(b)(6) (relating to income from prohibited
transactions) is amended by redesignating subparagraphs (D)
and (E) as subparagraphs (E) and (F), respectively, and by
inserting after subparagraph (C) the following new
subparagraph:
``(D) Certain sales not to constitute prohibited
transactions--For purposes of this part the term `prohibited
transaction' does not include a sale of property which is a
real estate asset (as defined in section 856(c)(5)(B)) if--
``(i) the trust held the property for not less than 4 years
in connection with the trade or business of producing timber,
``(ii) the aggregate expenditures made by the trust, or a
partner of the trust, during the 4-year period preceding the
date of sale which--
``(I) are includible in the basis of the property (other
than timberland acquisition expenditures), and
``(II) are directly related to operation of the property
for the production of timber or for the preservation of the
property for use as timberland,

do not exceed 30 percent of the net selling price of the
property.

``(iii) the aggregate expenditures made by the trust, or a
partner of the trust, during the 4-year period preceding the
date of sale which--
``(I) are includible in the basis of the property (other
than timberland acquisition expenditures), and
``(II) are not directly related to operation of the
property for the production of timber, or for the
preservation of the property for use as timberland,

do not exceed 5 percent of the net selling price of the
property,

``(iv)(I) during the taxable year the trust does not make
more than 7 sales of property (other than sales of
foreclosure property or sales to which section 1033 applies),
or
``(II) the aggregate adjusted bases (as determined for
purposes of computing earnings and profits) of property
(other than sales of foreclosure property or sales to which
section 1033 applies) sold during the taxable year does not
exceed 10 percent of the aggregate bases (as so determined)
of all of the assets of the trust as of the beginning of the
taxable year,
``(v) in the case that the requirement of clause (iv)(I) is
not satisfied, substantially all of the marketing
expenditures with respect to the property were made through
an independent contractor (as defined in section 856(d)(3))
from whom the trust itself does not derive or receive any
income, and
``(vi) the sales price of the property sold by the trust to
its taxable REIT subsidiary is not base din whole or in part
on the income or profits of the subsidiary or the income or
profits that the subsidiary derives from the sale or
operation of such property.''

SEC. 107. EFFECTIVE DATES.

(a) In General.--Except as provided in subsection (b), the
amendments made by this title shall apply to taxable years
beginning after December 31, 2000.
(b) Sections 105 Through 106--The amendments made by
sections 103, 104, 105 and 106 shall apply to taxable years
beginning after the date of the enactment of this Act.

TITLE III--REIT SAVINGS PROVISIONS

SEC. 301. REVISIONS TO REIT PROVISIONS

(a) Rules of Application for Failure to Satisfy Section
856(c)(4).--Section 856(c) (relating to definition of real
estate investment trust), as amended by section 101, is
amended by inserting after paragraph (6) the following new
paragraph:
``(7) Rules of application for failure to satisfy paragraph
(4)--
``(A) De minimis failure--A corporation, trust, or
association that fails to meet the requirements of paragraph
(4)(B)(iii) for a particular quarter shall nevertheless be
considered to have satisfied the requirements of such
paragraph for such quarter if--
``(i) such failure is due to the ownership of assets the
total value of which does not exceed the lesser of--
``(I) 1 percent of the total value of the trust's assets at
the end of the quarter for which such measurement is done,
and
``(II) $10,000,000, and
``(ii)(I) the corporation, trust, or association, following
the identification of such failure, disposes of assets in
order to meet the requirements of such paragraph within 6
months after the last day of the quarter in which the
corporation, trust or association's identification of the
failure to satisfy the requirements of such paragraph
occurred or such other time period prescribed by the
Secretary and in the manner prescribed by the Secretary, or
``(II) the requirements of such paragraph are otherwise met
within the time period specified in subclause (I).
``(B) Failures exceeding de minimis amount.--A corporation,
trust, or association that fails to meet the requirements of
paragraph (4) for a particular quarter shall nevertheless be
considered to have satisified the requirements of such
paragraph for such quarter if--
``(i) such failure involves the ownership of assets the
total value of which exceeds the de minimis standard
described in subparagraph (A)(i) at the end of the quarter
for which such measurement is done,
``(ii) following the corporation, trust, or association's
identification of the failure to satisfy the requirements of
such paragraph for a particular quarter, a description of
each asset that causes the corporation, trust, or association
to fail to satisfy the requirements of such paragraph at the
close of such quarter of any taxable year is set forth in a
schedule for such quarter filed in accordance with
regulations prescribed by the Secretary,
``(iii) the failure to meet the requirements of such
paragraph for a particular quarter is due to reasonable cause
and not due to willful neglect,
``(iv) the corporation, trust, and association pays a tax
computed under subparagraph (C), and
``(v)(I) the corporation, trust, or association disposes of
the assets set forth on the schedule specified in clause (ii)
within 6 months after the last day of the quarter in which
the corporation, trust or association's identification of the
failure to satisfy the requirements of such paragraph
occurred or such other time period prescribed by the
Secretary and in the manner prescribed by the Secretary, or
``(II) the requirements of such paragraph are otherwise met
within the time period specified in subclause (I).
``(C) Tax--For purposes of subparagraph (B)(iv)--
``(i) Tax Imposed.--If a corporation, trust, or association
elects the application of this subparagraph, there is hereby
imposed a tax on the failure described in subparagraph (B) of
such corporation, trust, or association. Such tax shall be
paid by the corporation, trust, or association.
``(ii) Tax computed.--The amount of the tax imposed by
clause (i) shall be the greater of--
``(I) $50,000, or
``(II) the amount determined (pursuant to regulations
promulgated by the Secretary) by multiplying the net income
generated by the assets described in the schedule specified
in subparagraph (B)(ii) for the period specified in clause
(iii) by the highest rate of tax specified in section 11.
``(iii) Period.--For purposes of clause (ii)(II), the
period described in this clause is the period beginning on
the first date that the failure to satisfy the requirements
of such paragraph (4) occurs as a result of the ownership of
such assets and ending on the earlier of the date on which
the trust disposes of such assets or the end of the first
quarter when there is no longer a failure to satisfy such
paragraph (4).
``(iv) Administrative provisions.--For purposes of subtitle
F, the taxes imposed by this subparagraph shall be treated as
excise taxes with respect to which the deficiency procedures
of such subtitle apply.''.
(b) Modification of Rules of Application for Failure to
Satisfy Sections 856(c)(2) or 856(c)(3).--Paragraph (6) of
section 856(c) (relating to definition of real estate
investment trust) is amended by striking subparagraphs (A)
and (B), by redesignating subparagraph (C) as subparagraph
(B), and by inserting before subparagraph (B) (as so
redesignated) the following new subparagraph:
``(A) following the corporation, trust, or association's
identification of the failure to meet the requirements of
paragraph (2) or (3), or of both such paragraphs, for any
taxable year, a description of each item of its gross income
described in such paragraphs is set forth in a schedule for
such taxable year filed in accordance with regulations
prescribed by the Secretary, and''.
(c) Reasonable Cause Exception to Loss of REIT Status if
Failure to Satisfy Requirements--Subsection (g) of section
856 (relating to termination of election) is amended--
(1) in paragraph (1) by inserting before the period at the
end of the first sentence the following: `unless paragraph
(5) applies', and
(2) by adding at the end the following new paragraph:
``(5) Entities to which paragraph applies--This paragraph
applies to a corporation, trust, or association--
``(A) which is not a real estate investment trust to which
the provisions of this part apply for the taxable year due to
one or more failures to comply with one or more of the
provisions of this part (other than subsection (c)(6) or
(c)(7) of section 856),
``(B) such failures are due to reasonable cause and not due
to willful neglect, and
``(C) if such corporation, trust, or association pays (as
prescribed by the Secretary in regulations and in the same
manner as tax) a penalty of $50,000 for each failure to
satisfy a provision of this part due to reasonable cause and
not willful neglect.''.
(d) Deduction of Tax Paid From Amount Required To Be
Distributed--Subparagraph (E) of section 857(b)(2) is amended
by striking `(7)' and inserting `(7) of this subsection,
section 856(c)(7)(B)(iii), and section 856(g)(1).'.
(e) Expansion of Deficiency Dividend Procedure--Subsection
(e) of section 860 is amended by striking `or' at the end of
paragraph (2), by striking the period at the end of paragraph
(3) and inserting `; or', and by adding at the end the
following new paragraph:

[[Page S6522]]

``(4) a statement by the taxpayer attached to its amendment
or supplement to a return of tax for the relevant tax
year.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after date of
enactment.
______

SA 627. Mr. HATCH 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, add the following:

SEC. ____. EXCLUSION OF CERTAIN PUNITIVE DAMAGE AWARDS.

(a) In General.--Section 104 (relating to compensation for
injuries or sickness) is amended by redesignating subsection
(d) as subsection (e), and by inserting after subsection (c)
the following new subsection:
``(d) Exclusion of Punitive Damages Paid to a State Under a
Split-Award Statute.--
``(1) In general.--The phrase `(other than punitive
damages)' in subsection (a) shall not apply to--
``(A) any portion of an award of punitive damages in a
civil action which is paid to a State under a split-award
statute, or
``(B) any attorneys' fees or other costs incurred by the
taxpayer in connection with obtaining an award of punitive
damages to which subparagraph (A) is applicable.
``(2) Split-award statute.--For purposes of this
subsection, the term `split-award statute' means a State law
that requires a fixed portion of an award of punitive damages
in a civil action to be paid to the State.''.
(b) Effective Date.--The amendment made by this section
shall apply to awards made in taxable years ending after the
date of the enactment of this Act.
______

SA 628. Mr. DORGAN 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. ____. 5-YEAR EXTENSION OF CREDIT FOR ELECTRICITY
PRODUCED FROM WIND.

(a) In General.--Section 45(c)(3)(A) (relating to wind
facility) is amended by striking ``2004'' and inserting
``2009''.
(b) 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 ``37.6%'' shall be substituted for
``35%''.
______

SA 629. Mr. DORGAN 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 357.
______

SA 630. Mr. DORGAN 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. ____. 5-YEAR EXTENSION OF CREDIT FOR ELECTRICITY
PRODUCED FROM WIND.

Section 45(c)(3)(A) (relating to wind facility) is amended
by striking ``2004'' and inserting ``2009''.

On page 19, line 13, strike ``2007'' and insert ``2008''.

On page 26, line 19, strike ``2007'' and insert ``2008''.

On page 26, line 22, strike ``2007'' and insert ``2008''.
______

SA 631. Mr. DORGAN 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 8, strike the matter preceding line 1, and insert:

------------------------------------------------------------------------
The corresponding percentages shall be
``In the case of taxable years       substituted for  the following
beginning during calendar                  percentages:
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%     35.3%
2004 and thereafter...........     25.0%      28.0%    33.0%    35.0%''.
------------------------------------------------------------------------

Strike section 357.
______

SA 632. Mr. DORGAN 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. ____. ENSURING DEFICIT REDUCTION.

(a) Trigger.--Notwithstanding any other provision of this
Act, the provisions as described in subsection (b) shall take
effect only as provided in subsection (c).
(b) Provision Described.--A provision of this Act described
in this subsection is--
(1) a provision of this Act that 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) a provision of this Act that provides a 10 percent
dividends exclusion between December 31, 2003, and December
31, 2007, and a 20 percent dividends exclusion after December
31, 2007.
(c) Delay.--
(1) In general.--Each year when the final monthly Treasury
report for the most recently ended fiscal year is released,
the Secretary of the Treasury shall certify whether the on-
budget deficit exceeds $300,000,000,000 for such year.
(2) Effective date.--The provisions described in subsection
(b) shall become effective on January 1 in the calendar year
following the issuance of the final Treasury report only if
the Secretary has determined that the on-budget deficit is
$300,000,000,000 or less for the recently ended fiscal year.
(d) Discretionary Spending Limitation.--
(1) In general.--Notwithstanding any other provision of
law, in any fiscal year subject to the delay provisions of
subsection (c)--
(A) the amount of budget authority for discretionary
spending for Federal agency administrative overhead expenses
shall be limited to the level in the preceding fiscal year
minus 5 percent; and
(B) with respect to a second or subsequent consecutive
fiscal year subject to this subsection, the amount of budget
authority for discretionary spending for Federal agency
administrative overhead expenses shall be limited to the
level in the preceding fiscal year.
(2) Definition.--In this subsection, the term
``administrative overhead expenses'' mean costs of resources
that are jointly or commonly used to produce 2 or more types
of outputs but are not specifically identifiable with any of
the outputs. Administrative overhead expenses include general
administrative services, general research and technology
support, rent, employee health and recreation facilities, and
operating and maintenance costs for buildings, equipment, and
utilities.
______

SA 633. Mr. DORGAN 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. ____. MECHANISM TO PROTECT SOCIAL SECURITY

(a) Certification.--
(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 the amendment made
by section 102 of this Act with respect to the highest
individual income tax rate 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 Acceleration of Reduction of Highest
Individual Income Tax Rate.--Notwithstanding any other
provision of law or this Act, the amendment made by section
102 of this Act with respect to the highest individual income
tax rate 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 such
amendment takes effect.
______

SA 634. Mr. DORGAN 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:

[[Page S6523]]

Subtitle D--Medicare Improvements

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. INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS
OF MEDICAL EDUCATION (IME).

(a) In General.--Section 1886(d)(5)(B)(ii) of the Social
Security Act (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--
(1) in subclause (VI), by striking ``and'' at the end; and
(2) by striking subclause (VII) and inserting the following
new subclauses:
``(VII) during fiscal year 2003, ``c'' is equal to 1.35.
``(VIII) during fiscal year 2004, ``c'' is equal to 1.85;
and
``(IX) on or after October 1, 2004, `c' is equal to 1.6.''.
(b) Conforming Amendment Relating to Determination of
Standardized Amount.--Section 1886(d)(2)(C)(i) of the Social
Security Act (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 532(a) of the Jobs and
Growth Tax Relief Reconciliation Act of 2003'' after
``2000''.

SEC. 533. PERMANENT INCREASE IN MEDICARE PAYMENT FOR HOME
HEALTH SERVICES FURNISHED IN A RURAL AREA.

(a) In General.--Section 1895 of the Social Security Act
(42 U.S.C. 1395fff) is amended by adding at the end the
following new subsection:
``(f) Increase in Payment for Services Furnished in a Rural
Area.--
``(1) In general.--In the case of home health services
furnished in a rural area (as defined in section
1886(d)(2)(D)) on or after April 1, 2003, the Secretary shall
increase the payment amount otherwise made under this section
for such services by 10 percent.
``(2) Waiver of budget neutrality.--The Secretary shall not
reduce the standard prospective payment amount (or amounts)
under this section applicable to home health services
furnished during a period to offset the increase in payments
resulting from the application of paragraph (1).''.
(b) Effective Date.--The amendments made by this section
shall apply to services furnished on or after April 1, 2003.

SEC. 534. 3-YEAR EXTENSION OF CERTAIN PAYMENT PROVISIONS FOR
SKILLED NURSING FACILITY SERVICES UNDER THE
MEDICARE PROGRAM.

(a) 3-Year Extension of Temporary Increase in Nursing
Component of PPS Federal Rate.--Section 312(a) of Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (114 Stat. 2763A-498), as enacted into law by section
1(a)(6) of Public Law 106-554, is amended by striking ``, and
before October 1, 2002'' and inserting ``and before October
1, 2005''.
(b) 3-Year Extension of Increase for Skilled Nursing
Facility Adjusted Federal Per Diem Rate Through Fiscal Year
2005.--Section 101(d) of the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (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
``through 2005''; and
(2) in paragraph (1), by striking ``and 2002'' and
inserting ``through 2005''.
(c) Effective Date.--The amendments made by this section
shall be effective as if this section had been enacted before
October 1, 2002. The Secretary of Health and Human Services
shall promptly provide for such adjustments in payments as
may be required based on such amendments for services
furnished during periods before the date of implementation of
such amendments.

SEC. 535. TWO-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS.

Section 1833(g)(4) of the Social Security Act (42 U.S.C.
1395l(g)(4)) is amended by striking ``and 2002'' and
inserting ``2002, 2003, and 2004''.

SEC. 536. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR ALL
MEDICARE BENEFICIARIES.

(a) In General.--Section 1861(s)(2)(J) (42 U.S.C.
1395x(s)(2)(J)) is amended by striking ``, to an individual
who receives'' and all that follows before the semicolon at
the end and inserting ``to an individual who has received an
organ transplant''.
(b) Effective Date.--The amendments made by this section
shall apply to drugs furnished on or after the date of the
enactment of this Act.

SEC. 537. BUDGET PROVISIONS.

(a) Inapplicability of Sunset.--The provisions of section
601(a) shall not apply to the provisions of, and amendments
made by, this subtitle.
(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 and 2004, the following percentages shall
be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004, 37.6%.
______

SA 635. Mr. LEVIN (for himself and Mr. Reid) 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 15, line 8, strike ``$75,000'' and insert
``$82,500''.
Strike sections 341 and 342 of the bill and insert:

SEC. 341. PREVENTION OF CORPORATE EXPATRIATION TO AVOID
UNITED STATES INCOME TAX.

(a) In General.--Paragraph (4) of section 7701(a) (defining
domestic) is amended to read as follows:
``(4) Domestic.--
``(A) In general.--Except as provided in subparagraph (B),
the term `domestic' when applied to a corporation or
partnership means created or organized in the United States
or under the law of the United States or of any State unless,
in the case of a partnership, the Secretary provides
otherwise by regulations.
``(B) Certain corporations treated as domestic.--
``(i) In general.--The acquiring corporation in a corporate
expatriation transaction shall be treated as a domestic
corporation.
``(ii) Corporate expatriation transaction.--For purposes of
this subparagraph, the term `corporate expatriation
transaction' means any transaction if--

``(I) a nominally foreign corporation (referred to in this
subparagraph as the `acquiring corporation') acquires, as a
result of such transaction, directly or indirectly
substantially all of the properties held directly or
indirectly by a domestic corporation, and
``(II) immediately after the transaction, more than 80
percent of the stock (by vote or value) of the acquiring
corporation is held by former shareholders of the domestic
corporation by reason of holding stock in the domestic
corporation.

``(iii) Lower stock ownership requirement in certain
cases.--Subclause (II) of clause (ii) shall be applied by
substituting `50 percent' for `80 percent' with respect to
any nominally foreign corporation if--

``(I) such corporation does not have substantial business
activities (when compared to the total business activities of
the expanded affiliated group) in the foreign country in
which or under the law of which the corporation is created or
organized, and
``(II) the stock of the corporation is publicly traded and
the principal market for the public trading of such stock is
in the United States.

``(iv) Partnership transactions.--The term `corporate
expatriation transaction' includes any transaction if--

``(I) a nominally foreign corporation (referred to in this
subparagraph as the `acquiring corporation') acquires, as a
result of such

[[Page S6524]]

transaction, directly or indirectly properties constituting a
trade or business of a domestic partnership,
``(II) immediately after the transaction, more than 80
percent of the stock (by vote or value) of the acquiring
corporation is held by former partners of the domestic
partnership or related foreign partnerships (determined
without regard to stock of the acquiring corporation which is
sold in a public offering related to the transaction), and
``(III) the acquiring corporation meets the requirements of
subclauses (I) and (II) of clause (iii).

``(v) Special rules.--For purposes of this subparagraph--

``(I) a series of related transactions shall be treated as
1 transaction, and
``(II) stock held by members of the expanded affiliated
group which includes the acquiring corporation shall not be
taken into account in determining ownership.

``(vi) Other definitions.--For purposes of this
subparagraph--

``(I) Nominally foreign corporation.--The term `nominally
foreign corporation' means any corporation which would (but
for this subparagraph) be treated as a foreign corporation.
``(II) Expanded affiliated group.--The term `expanded
affiliated group' means an affiliated group (as defined in
section 1504(a) without regard to section 1504(b)).
``(III) Related foreign partnership.--A foreign partnership
is related to a domestic partnership if they are under common
control (within the meaning of section 482), or they shared
the same trademark or tradename.''

(b) Effective Dates.--
(1) In general.--The amendment made by this section shall
apply to corporate expatriation transactions completed after
September 11, 2001.
(2) Special rule.--The amendment made by this section shall
also apply to corporate expatriation transactions completed
on or before September 11, 2001, but only with respect to
taxable years of the acquiring corporation beginning after
December 31, 2003.

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.

``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 7701(a)(4)(B)(ii)(I) 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 section
7701(a)(4)(B) applies. 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.
______

SA 636. Mr. EDWARDS 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. ____. FAMILY LEAVE TAX CREDIT; REPEAL OF TAX BENEFITS
RELATING TO COMPANY-OWNED LIFE INSURANCE.

(a) In General.--
(1) Allowance of credit.--Subpart A of part IV of
subchapter A of chapter 1 (relating to refundable credits) is
amended inserting after section 24 the following new section:

[[Page S6525]]

``SEC. 24A. FAMILY LEAVE CREDIT.

``(a) In General.--There shall be allowed as a credit
against the tax imposed by this chapter for the taxable year
with respect to each qualified child of the taxpayer an
amount equal to $500 ($1,000 in the case of taxable years
2005 and 2006, and $1,500 in the case of taxable years after
2006).
``(b) Limitation.--
``(1) In general.--The amount of the credit allowable under
subsection (a) shall be reduced (but not below zero) by $50
for each $1,000 (or fraction thereof) by which the taxpayer's
modified adjusted gross income exceeds the threshold amount.
For purposes of the preceding sentence, the term `modified
adjusted gross income' means adjusted gross income increased
by any amount excluded from gross income under section 911,
931, or 933.
``(2) Threshold amount.--For purposes of paragraph (1), the
term `threshold amount' means--
``(i) $110,000 in the case of a joint return,
``(ii) $75,000 in the case of an individual who is not
married, and
``(iii) $ 55,000 in the case of a married individual filing
a separate return.

For purposes of this paragraph, marital status shall be
determined under section 7703.
``(c) Portion of Credit Refundable.--The aggregate credits
allowed to a taxpayer under subpart C shall be increased by
the lesser of--
``(1) the credit which would be allowed under this section
without regard to this subsection and the limitation under
section 26(a), or
``(2) the amount by which the aggregate amount of credits
allowed by this subpart (determined without regard to this
subsection) would increase if the limitation imposed by
section 26(a) were increased by the taxpayer's earned income
(within the meaning of section 32(c)(2)) over such
limitation.

The amount of the credit allowed under this subsection shall
not be treated as a credit allowed under this subpart and
shall reduce the amount of credit otherwise allowable under
subsection (a) without regard to section 26(a).
``(d) Qualified Child.--For purposes of this section, the
term `qualified child' means with respect to any taxable
year--
``(1) except with respect to an individual described in
paragraph (2), any qualifying child (as defined in section
24(c) by substituting `age of 1' for `age of 17' in paragraph
(1)(B) thereof), and
``(2) any individual adopted by the taxpayer in such year
(within the meaning of section 23).
``(e) Inflation Adjustment.--
``(1) In general.--In the case of a taxable year beginning
after 2007, the $1,500 amount under subsection (a) shall be
increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) 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 2006'
for calendar year `1992' in subparagraph (B) thereof.
``(2) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $10, such amount shall
be rounded to the next lowest multiple of $10.''.
(2) Credit Allowed Against Alternative Minimum Tax.--
(A) In general.--Subsection (b) of section 24A (relating to
family leave credit), as added by paragraph (1), is amended
by adding at the end the following new paragraph:
``(3) Limitation based on amount of tax.--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 this subpart
(other than this section and sections 23, 24, and 25B) and
section 27 for the taxable year.''.
(B) Conforming amendments.--
(i) The heading for section 24A(b) is amended to read as
follows: ``Limitations.--''.
(B) The heading for section 24A(b)(1) is amended to read as
follows: ``Limitation based on adjusted gross income.--''.
(C) Section 24A(c) is amended by striking ``section 26(a)''
each place it appears and inserting ``subsection (b)(3)''.
(D) Subparagraph (C) of section 25(e)(1) is amended by
inserting ``24A,'' after ``24,''.
(E) Section 904(h) is amended by inserting ``24A,'' after
``24,''.
(F) Subsection (d) of section 1400C is amended by inserting
``24A,'' after ``24,''.
(3) 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 24 the
following new item:

``Sec. 24A. Family leave credit.''.

(4) Effective Date.--
(A) Except as provided in subparagraph (B), the amendments
made by this subsection shall apply to taxable years
beginning after December 31, 2002.
(B) The amendments made by paragraph (2) shall apply to
taxable years beginning after December 31, 2003.
(b) Repeal of Tax Benefits Relating to Company-Owned Life
Insurance.--
(1) Inclusion of life insurance investment gains.--Section
72 (relating to annuities; certain proceeds of endowment and
life insurance contracts) is amended by inserting after
subsection (j) the following new subsection:
``(k) Treatment of Certain Company-Owned Life Insurance
Contracts.--In the case of a company-owned life insurance
contract, the income on the contract (as determined under
section 7702(g)) for any taxable year shall be includible in
gross income for such year unless the contract covers the
life solely of individuals who are key persons (as defined in
section 264(e)(3)).''.
(2) Repeal of exclusion for death benefits.--Section 101
(relating to certain death benefits) is amended by adding at
the end the following new subsection:
``(j) Proceeds of Certain Company-Owned Life Insurance.--
Notwithstanding any other provision of this section, there
shall be included in gross income of the beneficiary of a
company-owned life insurance contract (unless the contract
covers the life solely of individuals who are key persons (as
defined in section 264(e)(3)))--
``(1) amounts received during the taxable year under such
contract, less
``(2) the sum of amounts which the beneficiary establishes
as investment in the contract plus premiums paid under the
contract.

Amounts included in gross income under the preceding sentence
shall be so included under section 72.''.
(3) Effective date.--The amendments made by this subsection
shall apply to contracts entered into after the date of
enactment of this section.
(c) Repeal of Dividend Exclusion.--The amendments made by
section 201 of this Act are repealed.
______

SA 637. 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; which was ordered to lie on the table; as follows:

On page 281, between lines 2 and 3, insert the following:

SEC. . CHILD SUPPORT ENFORCEMENT.

(a) No Effect on Rights and Liabilities.--Nothing in this
Act shall be construed to affect--
(1) the right of an individual or State to receive any
child support payment; or
(2) the obligation of an individual to pay child support.
(b) Allowance of Bad Debt Deduction for Unpaid Child
Support Payments.--
(1) In general.--Section 166 (relating to deduction for bad
debts) is amended by redesignating subsection (f) as
subsection (g) and by inserting after subsection (e) the
following new subsection:
``(f) Unpaid Child Support.--
``(1) In general.--In the case of a custodial parent who,
as of the close of the taxable year, is owed child support,
the amount of unpaid child support shall be deemed a canceled
debt as of such date, and shall be allowed as a deduction for
such taxable year.
``(2) Presumption of worthlessness.--Subsection (a)
(relating to worthless debts) shall not apply to child
support.
``(3) Subsequent payments.--If any unpaid child support
with respect to which a deduction was allowed under paragraph
(1) is subsequently paid to the custodial parent, the amount
of such payment shall not be included in the gross income of
the custodial parent, nor shall it be allowed as a deduction
to the delinquent debtor. The delinquent debtor shall be
neither required nor allowed to file an amended return in any
subsequent year to reflect the subsequent payment of unpaid
child support.
``(4) Full deduction from ordinary income.--Subsection (d)
(relating to the treatment of nonbusiness bad debt as a loss
from the sale or exchange of a capital asset) shall not apply
to the deductibility of unpaid child support.
``(5) Tax returns.--A custodial parent who wishes to deduct
the amount of unpaid child support shall include on the
return claiming the deduction the name and taxpayer
identification number of each child with respect to whom
child support payments to which this subsection applies are
required to be paid.
``(6) Information returns.--
``(A) In general.--A custodial parent who wishes to deduct
the amount of unpaid child support shall complete Form 1099-
CS (or such other form as the Secretary may prescribe) and
provide such form to the Secretary, and (if the address is
known) to the delinquent debtor, within 45 days following the
close of the taxable year for which the deduction is claimed.
Failure to so file such form with the Secretary (or, if the
address is known, with the delinquent debtor) shall result in
disallowance of the deduction for the taxable year.
``(B) Contents of form.--The Form 1099-CS (or such other
form as the Secretary may prescribe) shall contain--
``(i) the total amount of child support owed (whether or
not paid) for such taxable year,
``(ii) the total amount of unpaid child support as of the
last day of such taxable year,
``(iii) the name, address (if known), and taxpayer
identification number of the delinquent debtor, and
``(iv) notice that the delinquent debtor is required to
include such total amount of unpaid child support in gross
income for the delinquent debtor's taxable year which
includes the last day of the custodial parent's taxable year.
``(C) Debtor's address unknown.--If the delinquent debtor's
address is not known to the custodial parent, the Form 1099-
CS (or

[[Page S6526]]

such other form as the Secretary may prescribe) shall
indicate that fact. In such a case, the Secretary may send
such notice if the address is available to the Secretary, and
the notice from the custodial parent to the delinquent debtor
under subparagraph (A) shall not be required.
``(7) Determination of whether child support is paid.--
``(A) Child support enforcement office records as
conclusive evidence of payment.--Child support shall be
treated as paid if such payment is recorded by the State
office of child support enforcement in which the custodial
parent is registered.
``(B) Timely mailing as timely payment.--A payment received
by the State office of child support enforcement in which the
custodial parent is registered after the last day of the
custodial parent's taxable year shall be treated for the
purpose of this subsection as paid on such day if the
postmark date falls on or before such day. The rules of
section 7502(f) and regulations issued thereunder shall apply
for purposes of this subparagraph.
``(8) Definitions.--For the purposes of this subsection--
``(A) Child support.--The term `child support' means--
``(i) any periodic payment of a fixed amount, or
``(ii) any payment of a medical expense, education expense,
insurance premium, or other similar item,
which is required to be paid to a custodial parent by an
individual under a support instrument for the support of any
qualifying child of such individual. `Child support' does not
include any amount which is described in section 408(a)(3) of
the Social Security Act and which has been assigned to a
State.
``(B) Custodial parent.--The term `custodial parent' means
an individual who is entitled to receive child support and
who has registered with the appropriate State office of child
support enforcement charged with implementing section 454 of
the Social Security Act.
``(C) Delinquent debtor.--The term `delinquent debtor'
means a taxpayer who owes unpaid child support to a custodial
parent.
``(D) Qualifying child.--The term `qualifying child' means
a child of a custodial parent with respect to whom a
dependent deduction is allowable under section 151 for the
taxable year (or would be so allowable but for paragraph (2)
or (4) of section 152(e)).
``(E) Support instrument.--The term `support instrument'
means--
``(i) a decree of divorce or separate maintenance or a
written instrument incident to such a decree,
``(ii) a written separation agreement, or
``(iii) a decree (not described in clause (i)) of a court
or administrative agency requiring a parent to make payments
for the support or maintenance of 1 or more children of such
parent.
``(F) Unpaid child support.--The term `unpaid child
support' means child support that is payable for months
during a custodial parent's taxable year and unpaid as of the
last day of such taxable year, provided that such unpaid
amount as of such day equals or exceeds one-half of the total
amount of child support due to the custodial parent for such
year.''.
(2) Deduction for nonitemizers.--Section 62(a) of such Code
is amended by inserting after paragraph (18) the following
new paragraph:
``(19) Unpaid child support payments.--The deduction
allowed by section 166(f).''.
(3) Conforming amendment.--Section 166(d)(2) of such Code
is amended by striking ``or'' at the end of subparagraph (A),
by striking the period at the end of the subparagraph (B) and
by inserting ``, or'' and by adding at the end the following
new subparagraph:
``(C) a debt which constitutes unpaid child support payment
under subsection (f).''.
(c) Inclusion in Income of Amount of Unpaid Child
Support.--Section 108 (relating to discharge of indebtedness
income) is amended by adding at the end the following new
subsection:
``(h) Unpaid Child Support.--
``(1) In general.--For purposes of this chapter, any unpaid
child support of a delinquent debtor for any taxable year
shall be treated as amounts includible in gross income of the
delinquent debtor for the taxable year.
``(2) Determination of whether child support is unpaid.--
``(A) In general.--Child support shall be treated as paid
if such payment is recorded by the State office of child
support enforcement in which the custodial parent is
registered.
``(B) Timely mailing as timely payment.--A payment received
by the State office of child support enforcement in which the
custodial parent is registered after the last day of the
custodial parent's taxable year shall be treated for the
purpose of this subsection as paid on such day if the
postmark date falls on or before such day. The rules of
section 7502(f) and regulations issued thereunder shall apply
for purposes of this subparagraph.
``(3) Definitions.--For the purposes of this subsection--
``(A) Child support.--The term `child support' means--
``(i) any periodic payment of a fixed amount, or
``(ii) any payment of a medical expense, education expense,
insurance premium, or other similar item,
which is required to be paid to a custodial parent by an
individual under a support instrument for the support of any
qualifying child of such individual. `Child support' does not
include any amount which is described in section 408(a)(3) of
the Social Security Act and which has been assigned to a
State.
``(B) Custodial parent.--The term `custodial parent' means
an individual who is entitled to receive child support and
who has registered with the appropriate State office of child
support enforcement charged with implementing section 454 of
the Social Security Act.
``(C) Delinquent debtor.--The term `delinquent debtor'
means a taxpayer who owes unpaid child support to a custodial
parent.
``(D) Qualifying child.--The term `qualifying child' means
a child of a custodial parent with respect to whom a
dependent deduction is allowable under section 151 for the
taxable year (or would be so allowable but for paragraph (2)
or (4) of section 152(e)).
``(E) Support instrument.--The term `support instrument'
means--
``(i) a decree of divorce or separate maintenance or a
written instrument incident to such a decree,
``(ii) a written separation agreement, or
``(iii) a decree (not described in clause (i)) of a court
or administrative agency requiring a parent to make payments
for the support or maintenance of 1 or more children of such
parent.
``(F) Unpaid child support.--The term `unpaid child
support' means child support that is payable for months
during a custodial parent's taxable year and unpaid as of the
last day of such taxable year, provided that such unpaid
amount as of such day equals or exceeds one-half of the total
amount of child support due to the custodial parent for such
year.
``(4) Coordination with other laws.--Amounts treated as
income by paragraph (1) shall not be treated as income by
reason of paragraph (1) for the purposes of any provision of
law which is not an internal revenue law.''.
(d) Taxpayer Information Regarding Child Support Not Basis
for Audit.--A discrepancy between the tax returns of a
custodial parent and a delinquent debtor concerning whether a
payment of child support has been made may not be used or
relied upon by the Internal Revenue Service in any way in
selecting an individual's tax return for a general audit.
(e) Effective Date; Implementation.--The amendments made by
is section shall apply to taxable years beginning after
December 31, 2002. The Secretary of the Treasury shall
publish Form 1099-CS (or such other form that may be
prescribed to comply with the amendment made by subsection
(b)(1)) and regulations, if any, that may be deemed necessary
to carry out the purposes of this Act, not later than 90 days
after the date of enactment of this Act.

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)''.
______

SA 638. Mr. BUNNING 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. ____. INCOME TAX CREDIT TO DISTILLED SPIRITS WHOLESALERS
FOR COST OF CARRYING FEDERAL EXCISE TAXES ON
BOTTLED DISTILLED SPIRITS.

(a) In General.--Subpart A of part I of subchapter A of
chapter 51 of the Internal Revenue Code of 1986 (relating to
gallonage and occupational taxes) is amended by adding at the
end the following new section:

``SEC. 5011. INCOME TAX CREDIT FOR WHOLESALER'S AVERAGE COST
OF CARRYING EXCISE TAX.

``(a) In General.--For purposes of section 38, in the case
of an eligible wholesaler, the amount of the distilled
spirits wholesalers credit for any taxable year is the amount
equal to the product of--
``(1) the number of cases of bottled distilled spirits--
``(A) which were bottled in the United States, and
``(B) which are purchased by such wholesaler during the
taxable year directly from the bottler of such spirits, and
``(2) the average tax-financing cost per case for the most
recent calendar year ending before the beginning of such
taxable year.
``(b) Eligible Wholesaler.--For purposes of this section,
the term `eligible wholesaler' means any person who holds--
``(1) a permit under the Federal Alcohol Administration Act
as a wholesaler of distilled spirits, or
``(2) a basic permit under such Act as a distiller,
rectifier, blender or warehouser and bottler of distilled
spirits and acts as a wholesaler selling distilled spirits to
a State agency.
``(c) Average Tax-Financing Cost.--
``(1) In general.--For purposes of this section, the
average tax-financing cost per case

[[Page S6527]]

for any calendar year is the amount of interest which would
accrue at the deemed financing rate during a 60-day period on
an amount equal to the deemed Federal excise per case.
``(2) Deemed financing rate.--For purposes of paragraph
(1), the deemed financing rate for any calendar year is the
average of the corporate overpayment rates under paragraph
(1) of section 6621(a) (determined without regard to the last
sentence of such paragraph) for calendar quarters of such
year.
``(3) Deemed federal excise tax based on case of 12 80-
proof 750ml bottles.--For purposes of paragraph (1), the
deemed Federal excise tax per case is $25.68.
``(4) Number of cases in lot.--For purposes of this
section, the number of cases in any lot of distilled spirits
shall be determined by dividing the number of liters in such
lot by 9.''.
(b) Conforming Amendments.--
(1) Subsection (b) of section 38 of the Internal Revenue
Code of 1986 is amended by striking ``plus'' at the end of
paragraph (14), by striking the period at the end of
paragraph (15) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(16) in the case of an eligible wholesaler (as defined in
section 5011(b)), the distilled spirits wholesaler credit
determined under section 5011(a).''.
(2) Subsection (d) of section 39 of such Code (relating to
carryback and carryforward of unused credits) is amended by
adding at the end the following new paragraph:
``(11) No carryback of section 5011 credit before january
1, 2003.--No portion of the unused business credit for any
taxable year which is attributable to the credit determined
under section 5011(a) may be carried back to a taxable year
beginning before January 1, 2003.''.
(3) The table of sections for subpart A of part I of
subchapter A of chapter 51 of such Code is amended by adding
at the end the following new item:

``Sec. 5011. Income tax credit for wholesaler's average cost of
carrying excise tax.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
______

SA 639. Mr. SESSIONS (for himself and 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; as follows:

Viz:
Strike subsection (b) of section 601 and insert the
following:
(b) Exceptions
(1) Subsection (a) shall not apply to the provisions of,
and amendments made by, title I (other than section 107).
(2) Subsection (a) shall not apply to Title III (other than
section 362) however the provisions within Title III shall
not apply to taxable years beginning after December 31, 2015.
______

SA 640. 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:

On page 8, strike the matter preceding line 1, and insert:

------------------------------------------------------------------------
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 and 2005...................    25.0%     28.0%     33.0%     37.6%
2006 and thereafter.............    25.0%     28.0%     33.0%   35.0%''.
------------------------------------------------------------------------

Strike title II.
At the end of subtitle C of title V, insert:

SEC. 529. 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.
(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 529(a) of the Jobs and Growth Tax Relief
Reconciliation 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 529(a)(5) of the Jobs and Growth Tax Relief
Reconciliation 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.''
______

SA 641. 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:

At the end of subtitle A of title IV, insert:

SEC. ____. DEFERRED PAYMENT OF TAX BY CERTAIN SMALL
BUSINESSES.

(a) In General.--Subchapter B of chapter 62 (relating to
extensions of time for payment of tax) is amended by adding
at the end the following new section:

``SEC. 6168. EXTENSION OF TIME FOR PAYMENT OF TAX FOR CERTAIN
SMALL BUSINESSES.

``(a) In General.--An eligible small business may elect to
pay the tax imposed by chapter 1 in 4 equal installments.
``(b) Limitation.--The maximum amount of tax which may be
paid in installments under this section for any taxable year
shall not exceed whichever of the following is the least:
``(1) The tax imposed by chapter 1 for the taxable year.
``(2) The amount contributed by the taxpayer into a BRIDGE
Account during such year.
``(3) The excess of $250,000 over the aggregate amount of
tax for which an election under this section was made by the
taxpayer (or any predecessor) for all prior taxable years.
``(c) Eligible Small Business.--For purposes of this
section--
``(1) In general.--The term `eligible small business'
means, with respect to any taxable year, any person if--
``(A) such person meets the active business requirements of
section 1202(e) throughout such taxable year,
``(B) the taxpayer has gross receipts of $10,000,000 or
less for the taxable year,
``(C) the gross receipts of the taxpayer for such taxable
year are at least 10 percent greater than the average annual
gross receipts of the taxpayer (or any predecessor) for the 2
prior taxable years, and
``(D) the taxpayer uses an accrual method of accounting.

[[Page S6528]]

``(2) Certain rules to apply.--Rules similar to the rules
of paragraphs (2) and (3) of section 448(c) shall apply for
purposes of this subsection.
``(d) Date for Payment of Installments; Time for Payment of
Interest.--
``(1) Date for payment of installments.--
``(A) In general.--If an election is made under this
section for any taxable year, the first installment shall be
paid on or before the due date for such installment and each
succeeding installment shall be paid on or before the date
which is 1 year after the date prescribed by this paragraph
for payment of the preceding installment.
``(B) Due date for first installment.--The due date for the
first installment for a taxable year shall be whichever of
the following is the earliest:
``(i) The date selected by the taxpayer.
``(ii) The date which is 2 years after the date prescribed
by section 6151(a) for payment of the tax for such taxable
year.
``(2) Time for payment of interest.--If the time for
payment of any amount of tax has been extended under this
section--
``(A) Interest for period before due date of first
installment.--Interest payable under section 6601 on any
unpaid portion of such amount attributable to the period
before the due date for the first installment shall be paid
annually.
``(B) Interest during installment period.--Interest payable
under section 6601 on any unpaid portion of such amount
attributable to any period after such period shall be paid at
the same time as, and as a part of, each installment payment
of the tax.
``(C) Interest in the case of certain deficiencies.--In the
case of a deficiency to which subsection (e)(3) applies for a
taxable year which is assessed after the due date for the
first installment for such year, interest attributable to the
period before such due date, and interest assigned under
subparagraph (B) to any installment the date for payment of
which has arrived on or before the date of the assessment of
the deficiency, shall be paid upon notice and demand from the
Secretary.
``(e) Special Rules.--
``(1) Application of limitation to partners and s
corporation shareholders.--
``(A) In general.--In applying this section to a
partnership which is an eligible small business--
``(i) the election under subsection (a) shall be made by
the partnership,
``(ii) the amount referred to in subsection (b)(1) shall be
the sum of each partner's tax which is attributable to
items of the partnership and assuming the highest marginal
rate under section 1, and
``(iii) the partnership shall be treated as the taxpayer
referred to in paragraphs (2) and (3) of subsection (b).
``(B) Overall limitation also applied at partner level.--In
the case of a partner in a partnership, the limitation under
subsection (b)(3) shall be applied at the partnership and
partner levels.
``(C) Similar rules for s corporations.--Rules similar to
the rules of subparagraphs (A) and (B) shall apply to
shareholders in an S corporation.
``(2) Acceleration of payment in certain cases.--
``(A) In general.--If--
``(i) the taxpayer ceases to meet the requirement of
subsection (c)(1)(A), or
``(ii) there is an ownership change with respect to the
taxpayer,

then the extension of time for payment of tax provided in
subsection (a) shall cease to apply, and the unpaid portion
of the tax payable in installments shall be paid on or before
the due date for filing the return of tax imposed by chapter
1 for the first taxable year following such cessation.
``(B) Ownership change.--For purposes of subparagraph, in
the case of a corporation, the term `ownership change' has
the meaning given to such term by section 382. Rules similar
to the rules applicable under the preceding sentence shall
apply to a partnership.
``(3) Proration of deficiency to installments.--Rules
similar to the rules of section 6166(e) shall apply for
purposes of this section.
``(f) BRIDGE Account.--For purposes of this section--
``(1) In general.--The term `BRIDGE Account' means a trust
created or organized in the United States for the exclusive
benefit of an eligible small business, but only if the
written governing instrument creating the trust meets the
following requirements:
``(A) No contribution will be accepted for any taxable year
in excess of the amount allowed as a deferral under
subsection (b) for such year.
``(B) The trustee is a bank (as defined in section 408(n))
or another person who demonstrates to the satisfaction of the
Secretary that the manner in which such person will
administer the trust will be consistent with the requirements
of this section.
``(C) The assets of the trust consist entirely of cash or
of obligations which have adequate stated interest (as
defined in section 1274(c)(2)) and which pay such interest
not less often than annually.
``(D) The assets of the trust will not be commingled with
other property except in a common trust fund or common
investment fund.
``(E) Amounts in the trust may be used only--
``(i) as security for a loan to the business or for
repayment of such loan, or
``(ii) to pay the installments under this section.
``(2) Account taxed as grantor trust.--The grantor of a
BRIDGE Account shall be treated for purposes of this title as
the owner of such Account and shall be subject to tax thereon
in accordance with subpart E of part I of subchapter J of
this chapter (relating to grantors and others treated as
substantial owners).
``(3) Time when payments deemed made.--For purposes of this
section, a taxpayer shall be deemed to have made a payment to
a BRIDGE Account on the last day of a taxable year if such
payment is made on account of such taxable year and is made
within 3\1/2\ months after the close of such taxable year.
``(g) Reports.--The Secretary may require such reporting as
the Secretary determines to be appropriate to carry out this
section.
``(h) Application of Section.--This section shall apply to
taxes imposed for taxable years beginning after December 31,
2002, and before January 1, 2006.''.
(b) Priority of Lender.--Subsection (b) of section 6323
(relating to protection for certain interests even though
notice filed) is amended by adding at the end the following
new paragraph:
``(11) Loans secured by bridge accounts.--With respect to a
BRIDGE account (as defined in section 6168(f)) with any bank
(as defined in section 408(n)), to the extent of any loan
made by such bank without actual notice or knowledge of the
existence of such lien, as against such bank, if such loan is
secured by such account.''.
(c) Clerical Amendment.--The table of sections for
subchapter B of chapter 62 is amended by adding at the end
the following new item:

``Sec.  6168. Extension of time for payment of tax for certain small
businesses.''.

(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
______

SA 642. 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:

On page 8, strike the matter preceding line 1, and insert:

------------------------------------------------------------------------
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 and 2005................    25.0%     28.0%     33.0%     37.6%
2006 and thereafter..........    25.0%     28.0%     33.0%    35.0%''.
------------------------------------------------------------------------

Strike title II.

At the end of subtitle C of title V, insert:

SEC. ____. MINIMUM TAX NOT TO APPLY TO INDIVIDUALS WITH
ADJUSTED GROSS INCOME UNDER THRESHOLD AMOUNT.

(a) Exemption.--Section 55 is amended by adding at the end
the following:
``(e) Exclusion of Individuals.--
``(1) In general.--In the case of any natural person, no
tax shall be imposed by this section if the adjusted gross
income of the taxpayer for the taxable year does not exceed
the threshold amount.
``(2) Threshold amount.--For purposes of this subsection,
the term `threshold amount' means--
``(A) $100,000 in the case of--
``(i) a joint return, or
``(ii) a surviving spouse,
``(B) $70,000 in the case of an individual who--
``(i) is not married, and
``(ii) is not a surviving spouse, and
``(C) $50,000 in the case of a married individual filing a
separate return.''
(b) Conforming Amendment.--Section 55(a) is amended by
striking ``There'' and inserting ``Except as provided in
subsection (e), there''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
______

SA 643. 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:

On page 8, strike the matter preceding line 1, and insert:

------------------------------------------------------------------------
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 and 2005...................    25.0%     28.0%     33.0%     37.6%
2006 and thereafter.............    25.0%     28.0%     33.0%   35.0%''.
------------------------------------------------------------------------

At the end of subtitle C of title V, insert:

[[Page S6529]]

SEC.  . INCOME TAX CREDIT FOR EMPLOYERS HIRING NEW EMPLOYEES
OR INCREASING WAGES IN 2003.

(a) In General.--Subpart F of part IV of subchapter A of
chapter 1 (relating to rules for computing work opportunity
credit) is amended by inserting after section 51A the
following new section:

``SEC. 51B. REFUND OF PAYROLL TAXES ATTRIBUTABLE TO NEW
EMPLOYEES AND INCREASED WAGES DURING 2003.

``(a) General Rule.--In the case of an employee's first
taxable year beginning in 2003, the amount of the work
opportunity credit determined under section 51 (without
regard to this section) for the taxable year shall be
increased by the increased wages payroll tax rebate amount.
``(b) Increased Wages Payroll Tax Rebate Amount.--For
purposes of this section, the term `increased wages payroll
tax rebate amount' means an amount equal to 10 percent of the
excess (if any) of--
``(1) the wages paid or incurred by the employer with
respect to employment during 2003, over
``(2) the sum of--
``(A) the wages paid or incurred by the employer with
respect to employment during 2002, plus
``(B) an amount equal to the amount determined under
subparagraph (A) multiplied by a percentage equal to the
percentage change in the contribution and benefit base under
section 230 of the Social Security Act from 2002 to 2003.
``(c) Other Definitions and Rules.--For purposes of this
section--
``(1) Wages.--
``(A) In general.--The term `wages' has the meaning given
such term by section 3121(a).
``(B) Special role for railroad employers.--In the case of
any employer subject to tax under chapter 22 with respect to
any employee, the term `wages' includes compensation within
the meaning of section 3231(e).
``(2) Predecessors.--Any reference in this section to an
employer shall include a reference to a predecessor.
``(3) Other rules.--Rules similar to the rules of sections
51(k) and 52 shall apply.
``(d) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out this section,
including regulations for the application of this section in
the case of acquisitions and dispositions.''
(b) Conforming Amendment.--The table of sections for
subpart F of part IV of subchapter A of chapter 1 is amended
by inserting after the item relating to section 51A the
following new item:

``Sec. 51B. Refund of payroll taxes attributable to new employees and
increased wages during 2003.''
______

SA 644. Mr. BAUCUS (for himself and Mr. Grassley) 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, insert the following:

TITLE VII--EXTENSIONS OF CERTAIN EXPIRING PROVISIONS

Subtitle A--Extensions of Expiring Provisions

SEC. 701. PARITY IN THE APPLICATION OF CERTAIN LIMITS TO
MENTAL HEALTH BENEFITS.

(a) In General.--Subsection (f) of section 9812 is amended
by striking ``2003'' and inserting ``2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to plan years beginning after December 31, 2002.

SEC. 702. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST
REGULAR AND MINIMUM TAX LIABILITY.

(a) In General.--Paragraph (2) of section 26(a) is
amended--
(1) by striking ``rule for 2000, 2001, 2002, and 2003.--''
and inserting ``rule for 2000, 2001, 2002, 2003, and 2004.--
'', and
(2) by striking ``during 2000, 2001, 2002, or 2003,'' and
inserting ``during 2000, 2001, 2002, 2003, or 2004''.
(b) Conforming Amendments.--
(1) Section 904(h) is amended by striking ``during 2000,
2001, 2002, or 2003'' and inserting ``during 2000, 2001,
2002, 2003, or 2004''.
(2) The amendments made by sections 201(b), 202(f), and
618(b) of the Economic Growth and Tax Relief Reconciliation
Act of 2001 shall not apply to taxable years beginning during
2004.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.

SEC. 703. CREDIT FOR ELECTRICITY PRODUCED FROM CERTAIN
RENEWABLE RESOURCES.

(a) In General.--Subparagraphs (A), (B), and (C) of section
45(c)(3) are each amended by striking ``2004'' and inserting
``2005''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to facilities placed in service after December
31, 2002.

SEC. 704. WORK OPPORTUNITY CREDIT.

(a) In General.--Subparagraph (B) of section 51(c)(4) is
amended by striking ``2003'' and inserting ``2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2002.

SEC. 705. WELFARE-TO-WORK CREDIT.

(a) In General.--Subsection (f) of section 51A is amended
by striking ``2003'' and inserting ``2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to individuals who begin work for the employer
after December 31, 2002.

SEC. 706. TAXABLE INCOME LIMIT ON PERCENTAGE DEPLETION FOR
OIL AND NATURAL GAS PRODUCED FROM MARGINAL
PROPERTIES.

(a) In General.--Subparagraph (H) of section 613A(c)(6) is
amended by striking ``2004'' and inserting ``2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2002.

SEC. 707. QUALIFIED ZONE ACADEMY BONDS.

(a) In General.--Paragraph (1) of section 1397E(e) is
amended by striking ``2000, 2001, 2002, and 2003'' and
inserting ``2000, 2001, 2002, 2003, and 2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to obligations issued after the date of the
enactment of this Act.

SEC. 708. COVER OVER OF TAX ON DISTILLED SPIRITS.

(a) In General.--Paragraph (1) of section 7652(f) is
amended by striking ``January 1, 2004'' and inserting
``January 1, 2005''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to articles brought into the United States after
December 31, 2002.

SEC. 709. DEDUCTION FOR CORPORATE DONATIONS OF COMPUTER
TECHNOLOGY.

(a) Extension of Deduction.--Section 170(e)(6)(G) (relating
to termination) is amended by striking ``December 31, 2003''
and inserting ``December 31, 2004''.
(b) Effective Date.--The amendments made by this section
shall apply to contributions made after December 31, 2002.

SEC. 710. CREDIT FOR QUALIFIED ELECTRIC VEHICLES.

(a) In General.--Section 30 is amended--
(1) in subsection (b)(2)--
(A) by striking ``December 31, 2003,'' and inserting
``December 31, 2004,'', and
(B) in subparagraphs (A), (B), and (C), by striking
``2004'', ``2005'', and ``2006'', respectively, and inserting
``2005'', ``2006'', and ``2007'', respectively.
(2) in subsection (e), by striking ``December 31, 2006''
and inserting ``December 31, 2007''.
(b) Conforming Amendments.--Clause (iii) of section
280F(a)(1)(C) is amended by striking ``2007'' and inserting
``2008''.
(c) Effective Date.--The amendments made by this section
shall apply to property placed in service after December 31,
2002.

SEC. 711. DEDUCTION FOR CLEAN-FUEL VEHICLES AND CERTAIN
REFUELING PROPERTY.

(a) In General.--Section 179A is amended--
(1) in subsection (b)(1)(B)--
(A) by striking ``December 31, 2003,'' and inserting
``December 31, 2004,'', and
(B) in clauses (i), (ii), and (iii), by striking ``2004'',
``2005'', and ``2006'', respectively, and inserting ``2005'',
``2006'', and ``2007'', respectively, and
(2) in subsection (f), by striking ``December 31, 2006''
and inserting ``December 31, 2007''.
(b) Effective Date.--The amendments made by subsection (a)
shall apply to property placed in service after December 31,
2002.

SEC. 712. DEDUCTION FOR CERTAIN EXPENSES OF SCHOOL TEACHERS.

(a) In General.--Subparagraph (D) of section 62(a)(2) is
amended by striking ``during 2002 or 2003'' and inserting
``during 2002, 2003, or 2004''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2002.

SEC. 713. AVAILABILITY OF MEDICAL SAVINGS ACCOUNTS.

(a) In General.--Paragraphs (2) and (3)(B) of section
220(i) (defining cut-off year) are each amended by striking
``2003'' each place it appears and inserting ``2004''.
(b) Conforming Amendments.--
(1) Paragraph (2) of section 220(j) is amended by striking
``1998, 1999, 2001, or 2002'' each place it appears and
inserting ``1998, 1999, 2001, 2002, or 2003''.
(2) Subparagraph (A) of section 220(j)(4) is amended by
striking ``and 2002'' and inserting ``2002, and 2003''.
(c) Effective Date.--The amendments made by this section
shall take effect on January 1, 2003.

SEC. 714. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

(a) Extension of Termination Date.--Subsection (h) of
section 198 is amended by striking ``2003'' and inserting
``2004''.
(b) Effective Date.--The amendments made by this section
shall apply to expenditures paid or incurred after December
31, 2002.

SEC. 715. DISTRICT OF COLUMBIA INVESTMENT INCENTIVES.

(a) In General.--The following provisions are amended by
striking ``2003'' each place it appears and inserting
``2004'':
(1) Section 1400(f ).
(2) Section 1400A(b).
(b) Zero Capital Gains Rate.--Section 1400B (relating to
zero percent capital gains rate) is amended by striking
``2004'' each place it appears and inserting ``2005''.
(c) Extension of DC Homebuyer Credit.--Section 1400C(i)
(relating to application of section) is amended by striking
``2004'' and inserting ``2005''.

Subtitle B--Delay of Dividend Exclusion

SEC. 721. DELAY OF DIVIDEND EXCLUSION.

(a) In General.--Subparagraph (B) of section 116(a)(2)
(relating to partial exclusion of

[[Page S6530]]

dividend received by individuals), as added by section 201 of
this Act, is amended by striking ``2007'' and inserting
``2009''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to taxable years beginning after December 31,
2003.
______

SA 645. Mr. BAUCUS 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.  . 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 on or after the date of the enactment of the
Jobs and Growth Tax Relief Reconciliation Act of 2003,
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, 2005'',
(3) by striking ``September 11, 2004'' and inserting
``January 1, 2005'', and
(4) by striking ``pre-september 11, 2004'' and inserting
``pre-january 1, 2005''.
(b) Conforming Amendments.--
(1) The heading for clause (i) of section 1400L(b)(2)(C) is
amended by striking ``30 percent additional'' and inserting
``Additional''.
(2) Section 1400L(b)(2)(D) 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) 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
``2010''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to property
acquired on or after the date of the enactment of this Act
(2) Revision.--The amendment made by subsection (c) shall
apply to taxable years beginning after December 31, 2006.
______

SA 646. Mr. BUNNING 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. ____. INCOME TAX CREDIT FOR DISTILLED SPIRITS
WHOLESALERS AND FOR DISTILLED SPIRITS IN
CONTROL STATE BAILMENT WAREHOUSES FOR COSTS OF
CARRYING FEDERAL EXCISE TAXES ON BOTTLED
DISTILLED SPIRITS.

(a) In General.--Subpart A of part I of subchapter A of
chapter 51 (relating to gallonage and occupational taxes) is
amended by adding at the end the following new section:

``SEC. 5011. INCOME TAX CREDIT FOR AVERAGE COST OF CARRYING
EXCISE TAX.

``(a) In General.--For purposes of section 38, the amount
of the distilled spirits credit for any taxable year is the
amount equal to the product of--
``(1) in the case of--
``(A) any eligible wholesaler--
``(i) the number of cases of bottled distilled spirits--

``(I) which were bottled in the United States, and
``(II) which are purchased by such wholesaler during the
taxable year directly from the bottler of such spirits, or

``(B) any person which is subject to section 5005 and which
is not an eligible wholesaler, the number of cases of bottled
distilled spirits which are stored in a warehouse operated
by, or on behalf of, a State, or agency or political
subdivision thereof, on which title has not passed on an
unconditional sale basis, and
``(2) the average tax-financing cost per case for the most
recent calendar year ending before the beginning of such
taxable year.
``(b) Eligible Wholesaler.--For purposes of this section,
the term `eligible wholesaler' means any person which holds a
permit under the Federal Alcohol Administration Act as a
wholesaler of distilled spirits which is not a State, or
agency or political subdivision thereof.
``(c) Average Tax-Financing Cost.--
``(1) In general.--For purposes of this section, the
average tax-financing cost per case for any calendar year is
the amount of interest which would accrue at the deemed
financing rate during a 60-day period on an amount equal to
the deemed Federal excise tax per case.
``(2) Deemed financing rate.--For purposes of paragraph
(1), the deemed financing rate for any calendar year is the
average of the corporate overpayment rates under paragraph
(1) of section 6621(a) (determined without regard to the last
sentence of such paragraph) for calendar quarters of such
year.
``(3) Deemed federal excise tax per case.--For purposes of
paragraph (1), the deemed Federal excise tax per case is
$25.68.
``(d) Other Definitions and Special Rules.--For purposes of
this section--
``(1) Case.--The term `case' means 12 80-proof 750
milliliter bottles.
``(2) Number of cases in lot.--The number of cases in any
lot of distilled spirits shall be determined by dividing the
number of liters in such lot by 9.''.
(b) Conforming Amendments.--
(1) Subsection (b) of section 38 is amended by striking
``plus'' at the end of paragraph (14), by striking the period
at the end of paragraph (15) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(16) the distilled spirits credit determined under
section 5011(a).''.
(2) Subsection (d) of section 39 (relating to carryback and
carryforward of unused credits) is amended by adding at the
end the following new paragraph:
``(11) No carryback of section 5011 credit before january
1, 2003.--No portion of the unused business credit for any
taxable year which is attributable to the credit determined
under section 5011(a) may be carried back to a taxable year
beginning before January 1, 2003.''.
(3) The table of sections for subpart A of part I of
subchapter A of chapter 51 is amended by adding at the end
the following new item:

``Sec. 5011. Income tax credit for average cost of carrying excise
tax.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2002.
______

SA 647. 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:

On page 281, between lines 2 and 3, insert the following:

Subtitle D--Medicare Improvements

SEC. 531. INCREASE IN LEVEL OF ADJUSTMENT FOR INDIRECT COSTS
OF MEDICAL EDUCATION (IME).

(a) In General.--Section 1886(d)(5)(B)(ii) of the Social
Security Act (42 U.S.C. 1395ww(d)(5)(B)(ii)) is amended--
(1) in subclause (VI), by striking ``and'' at the end; and
(2) by striking subclause (VII) and inserting the following
new subclauses:
``(VII) during fiscal year 2003, ``c'' is equal to 1.35.
``(VIII) during fiscal year 2004, ``c'' is equal to 1.85;
and
``(IX) on or after October 1, 2004, `c' is equal to 1.6.''.
(b) Conforming Amendment Relating to Determination of
Standardized Amount.--Section 1886(d)(2)(C)(i) of the Social
Security Act (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 531(a) of the Jobs and
Growth Tax Relief Reconciliation Act of 2003'' after
``2000''.

SEC. 532. PERMANENT INCREASE IN MEDICARE PAYMENT FOR HOME
HEALTH SERVICES FURNISHED IN A RURAL AREA.

(a) In General.--Section 1895 of the Social Security Act
(42 U.S.C. 1395fff) is amended by adding at the end the
following new subsection:
``(f) Increase in Payment for Services Furnished in a Rural
Area.--
``(1) In general.--In the case of home health services
furnished in a rural area (as defined in section
1886(d)(2)(D)) on or after April 1, 2003, the Secretary shall
increase the payment amount otherwise made under this section
for such services by 10 percent.
``(2) Waiver of budget neutrality.--The Secretary shall not
reduce the standard prospective payment amount (or amounts)
under this section applicable to home health services
furnished during a period to offset the increase in payments
resulting from the application of paragraph (1).''.
(b) Effective Date.--The amendments made by this section
shall apply to services furnished on or after April 1, 2003.

SEC. 533. 3-YEAR EXTENSION OF CERTAIN PAYMENT PROVISIONS FOR
SKILLED NURSING FACILITY SERVICES UNDER THE
MEDICARE PROGRAM.

(a) 3-Year Extension of Temporary Increase in Nursing
Component of PPS Federal Rate.--Section 312(a) of Medicare,
Medicaid, and SCHIP Benefits Improvement and Protection Act
of 2000 (114 Stat. 2763A-498), as enacted into law by section
1(a)(6) of Public Law 106-554, is amended by striking ``, and
before October 1, 2002'' and inserting ``and before October
1, 2005''.
(b) 3-Year Extension of Increase for Skilled Nursing
Facility Adjusted Federal Per Diem Rate Through Fiscal Year
2005.--Section 101(d) of the Medicare, Medicaid, and SCHIP
Balanced Budget Refinement Act of 1999 (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
``through 2005''; and
(2) in paragraph (1), by striking ``and 2002'' and
inserting ``through 2005''.
(c) Effective Date.--The amendments made by this section
shall be effective as if this section had been enacted before
October 1, 2002. The Secretary of Health and Human Services
shall promptly provide for such adjustments in payments as
may be required

[[Page S6531]]

based on such amendments for services furnished during
periods before the date of implementation of such amendments.

SEC. 534. TWO-YEAR EXTENSION OF MORATORIUM ON THERAPY CAPS.

Section 1833(g)(4) of the Social Security Act (42 U.S.C.
1395l(g)(4)) is amended by striking ``and 2002'' and
inserting ``2002, 2003, and 2004''.

SEC. 535. COVERAGE OF IMMUNOSUPPRESSIVE DRUGS FOR ALL
MEDICARE BENEFICIARIES.

(a) In General.--Section 1861(s)(2)(J) (42 U.S.C.
1395x(s)(2)(J)) is amended by striking ``, to an individual
who receives'' and all that follows before the semicolon at
the end and inserting ``to an individual who has received an
organ transplant''.
(b) Effective Date.--The amendments made by this section
shall apply to drugs furnished on or after the date of the
enactment of this Act.

SEC. 536. BUDGET PROVISIONS.

(a) Inapplicability of Sunset.--The provisions of section
601(a) shall not apply to the provisions of, and amendments
made by, this subtitle.
(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 and 2004, the following percentages shall
be substituted for such years:
(1) For 2003, 38.6%.
(2) For 2004, 37.6%.
______

SA 648. 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 THE TREATMENT OF NET OPERATING
LOSSES.

(a) In General.--Subparagraph (A) of section 108(b)(2)
(relating to tax attributes affected; order of reduction) is
amended to read as follows:
``(A) NOL.--Any net operating loss (in the case of a
taxpayer which is a member of an affiliated group of
corporations which files a consolidated return under section
1501, any consolidated net operating loss, as defined in
regulations prescribed by the Secretary) for the taxable year
of the discharge, and any net operating loss carryover to
such taxable year.''.
(b) Effective date.--The amendment made by subsection (a)
shall apply to discharges of indebtedness occurring after May
8, 2003, except that discharges of indebtedness under any
plan of reorganization in a case under title 11, United
States Code, shall be deemed to occur on the date such plan
is confirmed.
______

SA 649. Mr. GRAHAM 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; as follows:

At the appropriate place insert the following:

SEC.   . CITRUS CANKER TREE RELIEF.

(a) Ratable Inclusion.
(1) In general.--Part I of subchapter Q of chapter 1
(relating to income averaging) is amended by inserting after
section 1301 the following new section:

``SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE
PAYMENTS.

``(a) In general.--At the election of the taxpayer, any
amount taken into account as income or gain by reason of
receiving a citrus canker tree payment shall be included in
the income of the taxpayer ratably over the 10-year period
beginning with the taxable year in which the payment is
received or accrued by the taxpayer. Such election shall be
made on the return of tax for such taxable year in such
manner as the Secretary prescribed, and, once made shall be
irrevocable.
``(b) Citrus Canker Tree Payment.--For purposes of
subsection (a), the term `citrus canker tree payment' means a
payment made to an owner of a commercial citrus grove to
recover income that was lost as a result of the removal of
commercial citrus trees to control canker under the
amendments to the citrus canker regulations (7 C.F.R. 301)
made by the final rule published in the Federal Register by
the Secretary of Agriculture on June 18, 2001 (66 Fed. Reg.
32713, Docket No. 00-37-4).''
(2) Clerical amendment.--The table of sections for part I
of subchapter Q of chapter is amended by inserting after the
item relating to section 1301 the following new item:

SEC. 1302. RATABLE INCOME INCLUSION FOR CITRUS CANKER TREE
PAYMENTS.''.

(b) Expansion of period within which converted Citrus Tree
Property Must be Replaced.--Section 1033 (relating to period
within which property must be replaced) is amended by
redesignating subsection (k) as subsection (1) and by
inserting after subsection (j) the following new subsection:
``(k) Commercial Trees Destroyed Because of Citrus Tree
Canker.--In the case of commercial citrus trees which are
compulsorily or involuntarily converted under a public order
as a result of the citrus tree canker, clause (i) of
subsection (a)(2)(B) shall be applied as if such clause
reads: `4 years after close of the first taxable year in
which any part of the gain upon conversion is realized, or
such additional period after the close of such taxable year
as determined appropriate by the Secretary on a regional
basis if a State or Federal plant health authority determines
with respect to such region that the land on which such trees
grew is not free from the bacteria that causes citrus tree
canker'.''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning before, on, or after
the date of the enactment of this Act.
______

SA 650. Mr. KENNEDY (for himself, Mr. Feingold, and Mrs. Feinstein)
submitted an amendment intended to be proposed by him to the bill H.R.
1298, to provide assistance to foreign countries to combat HIV AIDS,
tuberculosis, and malaria, and for other purposes; which was ordered to
lie on the table; as follows:

On page 54, strike lines 7 through 24, and insert the
following: ``medicines to treat opportunistic infections, at
the lowest possible price for products of assured quality (as
provided for in subparagraph (D)). Such procurement shall be
made anywhere in the world notwithstanding any provision of
law restricting procurement of goods to domestic sources.
``(B) Mechanisms for quality control and sustainable
supply.--Mechanisms to ensure that such HIV/AIDS
pharmaceuticals, antiviral therapies, and other appropriate
medicines are quality-controlled and sustainably supplied.
``(C) Distribution.--The distribution of such HIV/AIDS
pharmaceuticals, antiviral therapies, and other appropriate
medicines (including medicines to treat opportunistic
infections) to qualified national, regional, or local
organizations for the treatment of individuals with HIV/AIDS
in accordance with appropriate HIV/AIDS testing and
monitoring requirements and treatment protocols and for the
prevention of mother-to-child transmission of the HIV
infection.
``(D) Lowest possible price and assured quality.--
``(i) Lowest possible price.--With respect to an HIV/AIDS
pharmaceutical, an antiviral therapy, or any other
appropriate medicine, including a medicine to treat
opportunistic infections, the lowest possible price means the
lowest price at which such medicine (which includes all
products of assured quality with the same active ingredients)
may be obtained in sufficient quantity in either the United
States or elsewhere on the world market.
``(ii) Assured quality.--An HIV/AIDS pharmaceutical, an
antiviral therapy, or any other appropriate medicine,
including a medicine to treat opportunistic infections, shall
be considered a product of assured quality if it is--

``(I) approved by the Food and Drug Administration;
``(II) authorized for marketing by the European Commission;
``(III) on the most recent edition of the list of HIV-
related medicines prequalified for procurement by the World
Health Organization's Pilot Procurement Quality and Sourcing
Project; or
``(IV) during the period that begins on the date of
enactment of this section and ending on December 31, 2004,
authorized for use by the national regulatory authority of
the country where the product will be used.

``(iii) Intellectual property protections.--An HIV/AIDS
pharmaceutical, an antiviral therapy, or any other
appropriate medicine, including a medicine to treat
opportunistic infections, at the lowest possible price may
include any product in compliance with--

``(I) the intellectual property laws of the country where
the product is manufactured;
``(II) the intellectual property laws of the country where
the product will be used; and
``(III) applicable international obligations in the field
of intellectual property, to the extent consistent with the
flexibilities provided in the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS), as
interpreted in the Declaration on the TRIPS Agreement and
Public Health, adopted by the World Trade Organization at the
Fourth Ministerial Conference at Doha, Qatar on November 14,
2001.

``(iv) Prices publicly available.--Prices paid for
purchases of HIV/AIDS pharmaceuticals, antiviral therapies,
and other appropriate medicines, including medicines to treat
opportunistic infections, of assured quality shall be made
publicly available.
``(v) Application to appropriated funds.--Funds
appropriated under title IV of the United States Leadership
Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 that
are used for the procurement of HIV/AIDS pharmaceuticals,
antiviral therapies, and other appropriate medicines,
including medicines to treat opportunistic infections, shall
be used to procure products of assured quality at the lowest
possible price, as determined under this subparagraph.
______

SA 651. Mr. SCHUMER (for himself, Mr. DeWine, and Ms. Landrieu)
submitted an amendment intended to be proposed by him to the bill S.
1054, to

[[Page S6532]]

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 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
``(a) the area meets the requirements of subparagraphs (A)
and (B) of subsection (c)(2) and subparagraph (A) of
subsection (c)(3), or (b) the area contains a population of
less than 100 people.
``(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 652. Mrs. CLINTON (for herself and Mrs. Boxer) proposed an
amendment to the bill H.R. 1298, to provide assistance to foreign
countries to combat HIV AIDS, tuberculosis, and malaria, and for other
purposes: as follows:

On page 23, line 24, insert before the semicolon the
following: ``, including the pursuit of sexual relations with
adolescent girls''.

On page 24, strike lines 2 through 4, and insert the
following: ``developed to address the access of women and
adolescent girls to employment opportunities, income,
education and training, productive resources, and
microfinance programs;''.

On page 27, strike lines 19 through 23, and insert the
following:
(W) An analysis of strategies to reduce deaths from
cervical cancer caused by high risk strains of human
papillomavirus in women over 30 living in sub-Saharan Africa.
(X) A description of a comprehensive 5-year global AIDS
plan that shall be developed by the President to address
issue effecting, and promote specific strategies to overcome,
the extreme vulnerability of adolescent girls to HIV
infection, including self esteem, access to education, safe
employment and livelihood opportunities, pressures to marry
at an early age and bear children, and norms that do not
allow for safe and supportive family life and marriages.
(Y) A description of the programs, and the number of women
and girls reached through these programs--
(i) to increase women's access to currently available
prevention technologies and the steps taken to increase the
availability of such technologies;
(ii) that provide prevention education and training for
women and girls;
(iii) addressing violence and coercion; and
(iv) increasing access to treatment.
(Z) A description of the progress made on developing a
safe, effective, and user-friendly microbicide.

On page 51, line 8, strike ``and''.

On page 51, line 12, strike the period and insert a
semicolon.

On page 51, between lines 12 and 13, insert the following:
``(I) assistance for programs to dramatically increase
women's access to currently available female-controlled
prevention technologies and to microbicides when these become
available, and for the training and skills needed to use
these methods effectively;
``(J) assistance for research to develop safe, effective,
and usable microbicides;
``(K) assistance for programs to provide comprehensive
education for women and girls, including health education
that emphasizes skills building on negotiation and the
prevention of sexually transmitted infections and other
related reproductive health risks and strategies that
emphasize the delay of sexual debut;
``(L) assistance for strategies to prevent and address
gender-based violence and sexual coercion of women and
minors;
``(M) assistance to reduce the vulnerability of HIV/AIDS
for women, young people, and children who are refugees or
internally displaced persons; and
``(N) assistance for community-based strategies to reduce
the stigma faced by women affected by HIV and AIDS.

On page 52, line 3, strike ``; and'' and insert a
semicolon.

On page 52, line 10, strike the period and insert a
semicolon.

On page 52, between lines 10 and 11, insert the following:
``(D) assistance for programs that promote equitable access
to treatment and care for all women, by--
``(i) reducing economic and social barriers faced
disproportionately by women;
``(ii) directly increase women's access to affordable
drugs; and
``(iii) providing adequate pre- and post-natal care to
pregnant women and mothers infected with HIV or living with
AIDS to prevent an increase in the number of AIDS orphans;
and
``(E) assistance to increase resources for households
headed by females caring for AIDS orphans.

On page 81, after line 24, add the following:
(9) At the United Nations Special Session on HIV/AIDS in
June 2001, the United States also committed itself to the
specific goals with respect to reducing HIV prevalence among
youth, as specified in the Declaration of Commitment on HIV/
AIDS adopted by the United Nations General Assembly at the
Special Session.
______

SA 653. Mr. BAUCUS 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 15, line 18, insert ``, plus 50 percent of the
aggregate cost not otherwise taken into account for such
taxable year for section 179 property placed in service after
the date of the enactment of the Jobs and Growth Tax Relief
Reconciliation Act of 2003, and before January 1, 2005''
after ``$75,000''.

On page 19, line 13, strike ``2007'' and insert ``2010''.
On page 26, line 19, strike ``2007'' and insert ``2010''.
On page 26, line 22, strike ``2007'' and insert ``2010''.
______

SA 654. Mr. BINGAMAN (for himself, Mr. Enzi, Mrs. Lincoln, Mr. Smith,
and Mr. Nelson of Nebraska) 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 F of title III, add 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) 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--

[[Page S6533]]

(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.--Only with respect to fiscal year 2004, if
the statewide 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
paragraph) 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 for
fiscal year 2004 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.--The Secretary shall compute a DSH allotment
for the State of Hawaii for each of fiscal year 2004 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 striking ``Payment'' and inserting ``Subject to
paragraph (3), payment''; and
(B) by adding at the end the following:
``(3) Special rule.--The limitation of paragraph (1) shall
not apply in the case of Tennessee with respect to fiscal
year 2004 in the case of a revocation or termination of its
statewide waiver described in subsection (f)(6)(A).''.
(3) Effective date.--The amendments made by this subsection
shall take effect as if enacted on October 1, 2002.
______

SA 655. Mr. REID 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. ____ . RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF
SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS
TRAVEL.

(a) In General.--Subsection (m) of section 274 (relating to
additional limitations on travel expenses) is amended by
striking paragraph (3).
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act.
______

SA 656. Mr. DASCHLE 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 up to subtitle D 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.

[[Page S6534]]

(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.
``(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,

[[Page S6535]]

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) 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

[[Page S6536]]

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' 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

[[Page S6537]]

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 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

[[Page S6538]]

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.

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,

[[Page S6539]]

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. 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

[[Page S6540]]

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
``(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

[[Page S6541]]

consolidated with another person for purposes of such
reports, and
``(2) which--
``(A) is required to pay a penalty under this section with
respect to a listed transaction,
``(B) is required to pay a penalty under section 6662A with
respect to any reportable transaction at a rate prescribed
under section 6662A(c), or
``(C) is required to pay a penalty under section 6662B with
respect to any noneconomic substance transaction,

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

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

(c) Effective Date.--The amendments made by this section
shall apply to returns and statements the due date for which
is after the date of the enactment of this Act.

SEC. 703. ACCURACY-RELATED PENALTY FOR LISTED TRANSACTIONS
AND OTHER REPORTABLE TRANSACTIONS HAVING A
SIGNIFICANT TAX AVOIDANCE PURPOSE.

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

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

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

For purposes of subparagraph (A), any reduction of the excess
of deductions allowed for the taxable year over gross income
for such year, and any reduction in the amount of capital
losses which would (without regard to section 1211) be
allowed for such year, shall be treated as an increase in
taxable income.
``(2) Items to which section applies.--This section shall
apply to any item which is attributable to--
``(A) any listed transaction, and
``(B) any reportable transaction (other than a listed
transaction) if a significant purpose of such transaction is
the avoidance or evasion of Federal income tax.
``(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),

[[Page S6542]]

``(II) unreasonably relies on representations, statements,
findings, or agreements of the taxpayer or any other person,
``(III) does not identify and consider all relevant facts,
or
``(IV) fails to meet any other requirement as the Secretary
may prescribe.''.

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

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

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

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

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

SEC. 704. PENALTY FOR UNDERSTATEMENTS ATTRIBUTABLE TO
TRANSACTIONS LACKING ECONOMIC SUBSTANCE, ETC.

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

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

``(a) Imposition of Penalty.--If a taxpayer has an
noneconomic substance transaction understatement for any
taxable year, there shall be added to the tax an amount equal
to 40 percent of the amount of such understatement.
``(b) Reduction of Penalty for Disclosed Transactions.--
Subsection (a) shall be applied by substituting `20 percent'
for `40 percent' with respect to the portion of any
noneconomic substance transaction understatement with respect
to which the relevant facts affecting the tax treatment of
the item 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

[[Page S6543]]

cases in which 2 or more persons would otherwise be required
to meet such requirements,
``(2) exemptions from the requirements of this section, and
``(3) such rules as may be necessary or appropriate to
carry out the purposes of this section.''.
(b) Conforming Amendments.--
(1) The item relating to section 6111 in the table of
sections for subchapter B of chapter 61 is amended to read as
follows:

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

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

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

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

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

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

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

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

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

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

SEC. 708. MODIFICATIONS TO PENALTY FOR FAILURE TO REGISTER
TAX SHELTERS.

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

``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--

[[Page S6544]]

``(i) the maximum penalty under subparagraph (B)(i) shall
be increased to the greater of--

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

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

SEC. 713. FRIVOLOUS TAX SUBMISSIONS.

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

``SEC. 6702. FRIVOLOUS TAX SUBMISSIONS.

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

[[Page S6545]]

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) (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

[[Page S6546]]

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.--
(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)''.

[[Page S6547]]

(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.

``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.

[[Page S6548]]

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 657. Mr. INOUYE 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. __. CERTAIN SIGHTSEEING FLIGHTS EXEMPT FROM TAXES ON AIR
TRANSPORTATION.

(a) In General.--Section 4281 (relating to small aircraft
on nonestablished lines) is amended by adding at the end the
following new sentence: ``For purposes of this section, an
aircraft shall not be considered as operated on an
established line if such aircraft is operated on a flight the
sole purpose of which is sightseeing.''.
(b) Effective Date.--The amendment made by this section
shall apply with respect to transportation beginning on or
after the date of the enactment of this Act, but shall not
apply to any amount paid before such date.
______

SA 658. Mr. INOUYE 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. . EXEMPTION OF CERTAIN HELICOPTER USES FROM TAXES ON
TRANSPORTATION BY AIR.

(a) In General.--Section 4261 (relating to imposition of
tax) is amended by redesignating subsection (i) as subsection
(j) and by inserting after subsection (h) the following new
subsection:
``(i) Additional Exemption for Certain Helicopter Uses.--No
tax shall be imposed under this section or section 4271 on
air transportation by helicopter for the purpose of
transporting individuals and cargo to and from sites for the
purpose of conducting removal and environmental restoration
activities relating to unexploded ordnance.''.
(b) Conforming Amendment.--Section 4041(l) is amended by
striking ``(f) or (g)'' and inserting ``(f), (g), or (i)''.
(c) Effective Date.--The amendments made by this section
shall apply to transportation beginning after June 30, 1997,
and before August 1, 2005.
______

SA 659. 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; as follows:
At the end of subtitle C of title V, insert the following:

SEC. . MODIFICATION OF INVOLUNTARY CONVERSION RULES FOR
BUSINESSES AFFECTED BY THE SEPTEMBER 11TH
TERRORIST ATTACKS.

(a) In General.--Subsection (g) of section 1400L is amended
to read as follows:
``(g) Modification of Rules Applicable to Nonrecognition of
Gain.--In the case of property which is compulsorily or
involuntarily converted as a result of the terrorist attacks
on September 11, 2001, in the New York Liberty Zone--
``(1) which was held by a corporation which is a member of
an affiliated group filing a consolidated return, such
corporation shall be treated as satisfying the purchase
requirement of section 1033(a)(2) with respect to such
property to the extent such requirement is satisfied by
another member of the group, and
``(2) notwithstanding subsections (g) and (h) of section
1033, clause (i) of section 1033(a)(2)(B) shall be applied by
substituting `5 years' for `2 years' but only if
substantially all of the use of the replacement property is
in the City of New York, New York.''.
(b) Effective Date.--The amendments made by this Act shall
apply to involuntary conversions occurring on or after
September 11, 2001.
On page 19, line 13, strike ``2007'' and insert ``2008''.
______

SA 660. 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:

On page 19, line 13, strike ``2007'' and insert ``2008''.
At the end of subtitle C of title V, insert the following:

SEC. ____. TAX TREATMENT OF FOREIGN CORPORATIONS RELOCATING
TO WORLD TRADE CENTER AREA.

(a) In General.--Subchapter Y of chapter 1 (relating to New
York Liberty Zone benefits) is amended by adding at the end
the following new section:

``SEC. 1400M. NO ADDITIONAL CORPORATE INCOME TAXES ON FOREIGN
CORPORATIONS RELOCATING HEADQUARTERS OPERATIONS
TO NEW YORK LIBERTY ZONE.

``(a) General Rule.--If there is a qualified headquarters
relocation of an eligible foreign corporation, any qualified
headquarters activities of the corporation conducted in the
New York Liberty Zone shall be treated as conducted outside
the United States for purposes of determining--
``(1) the amount of any tax imposed by this chapter, or the
amount of withholding tax under chapter 3, on the
corporation, or
``(2) whether the corporation has a permanent establishment
within the United States for purposes of any applicable
income tax treaty between the United States and any foreign
country.
``(b) Qualified Headquarters Relocation.--For purposes of
this section--
``(1) In general.--The term `qualified headquarters
relocation' means any relocation of an eligible foreign
corporation's qualified headquarters activities to the New
York Liberty Zone but only if the corporation with respect to
such relocation--
``(A) before September 11, 2007, enters into a contract--
``(i) under which the corporation agrees to acquire, lease,
sublease, or otherwise occupy office space located in the New
York Liberty Zone for use in the conduct of the activities to
be relocated, and
``(ii) which requires a substantial financial commitment or
provides a substantial cancellation penalty, and
``(B) before September 11, 2009--
``(i) transfers to the New York Liberty Zone qualified
headquarters activities meeting the requirements of paragraph
(2), and
``(ii) locates employees in the New York Liberty Zone in
accordance with the requirements of paragraph (3).
``(2) Transfer of qualified headquarters activities.--The
requirements of this paragraph are met if the transfer of
qualified headquarters activities includes at least the
transfer of a substantial part of the following activities
which the eligible foreign corporation was performing for
members of its expanded affiliated group immediately before
the requirement of paragraph (1)(A) is met:
``(A) The activities described in clause (ii) of subsection
(c)(2)(A).
``(B) High-level activities described in clause (iii) of
subsection (c)(2)(A).
``(C) The activities described in clause (iv) of subsection
(c)(2)(A).
``(3) Transfer of employees.--
``(A) In general.--The requirements of this paragraph are
met if the eligible foreign corporation locates in the New
York Liberty Zone a number of employees equal to or greater
than the lesser of--
``(i) 200 employees, or
``(ii) the greater of--

``(I) 10 percent of the employees of the corporation and
the members of its expanded affiliated group for which the
corporation performs headquarters activities (as of the date
the requirements of paragraph (1)(B) are first met), or
``(II) 50 employees.

``(B) High-level employees.--The requirements of this
paragraph shall be treated as met only if the eligible
foreign corporation locates in the New York Liberty Zone at
least--
``(i) 50 percent of the senior officers of the corporation,
and
``(ii) 50 percent of the senior business development
personnel of the corporation.
``(C) Current u.s. employees not counted.--For purposes of
determining whether the requirements of this paragraph are
first met, and continue to be met during the 2-year period
after the date on which the requirements are first met, there
shall not be taken into account any individual who was an
employee of the eligible foreign corporation or any member of
its expanded affiliated group who was located in the United
States at any time during the 1-year period ending on the
later of--
``(i) the date the requirements of subsection (b)(1)(B) are
first met, or
``(ii) the date the employee is first located in the New
York Liberty Zone.

Any period during which an individual was located in the New
York Liberty Zone solely as part of a qualified headquarters
relocation

[[Page S6549]]

shall not be taken into account for purposes of the preceding
sentence.
``(D) Located.--An employee shall be treated as located in
the New York Liberty Zone or the United States for any period
if the services performed by the employee during the period
are performed primarily in the New York Liberty Zone or the
United States, respectively.
``(c) Eligible Foreign Corporation; Qualified Headquarters
Activities.--For purposes of this section--
``(1) Eligible foreign corporation.--The term `eligible
foreign corporation' means a foreign corporation which--
``(A) performs qualified headquarters activities for 1 or
more members of an expanded affiliated group including such
corporation, and
``(B) agrees to furnish to the Secretary (at such time and
in such manner as the Secretary may prescribe) such
information as the Secretary may require to carry out this
section, including the gross revenue of the corporation
derived from qualified headquarters activities.
``(2) Qualified headquarters activities.--
``(A) In general.--The term `qualified headquarters
activities' means, with respect to any eligible foreign
corporation--
``(i) the ownership and management of any member of the
expanded affiliated group of which it is a member,
``(ii) the conduct of any treasury function of a member of
the expanded affiliated group of which it is a member,
including the borrowing of funds, financing of members of the
group and related entities, and investment of excess
corporate funds, but not including the taking of deposits
from, or the making of loans to, the public,
``(iii) marketing and branding functions,
``(iv) senior business management and development, and
``(v) any other activity incidental to any activity
described in clauses (i) through (iv).
``(B) Certain activities previously conducted in u.s. not
included.--
``(i) In general.--Such term shall not include any activity
which the eligible foreign corporation or any member of its
expanded affiliated group engaged in through an office or
fixed place of business in the United States at any time
during the 3-year period ending on the date the requirements
of subsection (b)(1)(B) are first met.
``(ii) Exception for relocation activities.--The conduct of
any activity as part of a qualified headquarters relocation
shall not be taken into account in determining whether clause
(i) applies to the activity.
``(iii) Exclusion ceases to apply if activity not conducted
in u.s. for 5 years.--

``(I) In general.--Clause (i) shall not apply to any
activity conducted in the New York Liberty Zone during the
taxable year described in subclause (II) or any succeeding
taxable year.
``(II) Applicable taxable year.--A taxable year is
described in this subclause with respect to any activity if
such year is the first taxable year in which ends a
consecutive 5-year period which begins after the date the
requirements of subsection (b)(1)(B) are first met and during
which the eligible foreign corporation or any member of its
expanded affiliated group did not engage in such activity
through an office or fixed place of business within the
United States.

``(iv) Special rules for acquired entities.--

``(I) In general.--If an acquired entity engaged in an
activity described in subparagraph (A) through an office or
fixed place of business in the United States (other than an
activity which was a qualified headquarters activity of the
acquired entity for purposes of subsection (a)) at any time
during the 1-year period preceding the first date on which
the acquired entity became a member of the expanded
affiliated group of the eligible foreign corporation, such
activity shall be treated as an activity engaged in by the
eligible foreign corporation on the day preceding the first
day the requirements of subsection (b)(1)(B) are met.
``(II) Activities not conducted in u.s for 5 years.--If
subclause (I) applies to an activity, clause (iii) shall be
applied to the activity by substituting the date the acquired
entity became a member of the expanded affiliated group of
the eligible foreign corporation for the first day the
requirements of subsection (b)(1)(B) are met.
``(III) Acquired entity.--The term `acquired entity' means
any corporation or partnership which became a member of the
eligible foreign corporation's expanded affiliated group
after the first date the requirements of subsection (b)(1)(B)
are met.

``(v) Predecessor entities.--For purposes of this
subparagraph, any activity conducted by a predecessor or
related person with respect to a member of an expanded
affiliated group shall be treated as conducted by the member.
``(d) Termination and Recapture of Tax Benefits.--
``(1) In general.--This section shall not apply to any
qualified headquarters activities of an eligible foreign
corporation for any taxable year if the corporation at any
time during the taxable year or any preceding taxable year
fails to--
``(A) conduct the qualified headquarters activities
described in subsection (b)(2), or
``(B) meet the requirements of subsection (b)(3).

The Secretary may waive the application of this paragraph in
the case of a de minimis or inadvertent failure which is
corrected within a reasonable period of time after discovery.
``(2) Recapture of tax on certain eligible foreign
corporations.--
``(A) In general.--In addition to any tax imposed by this
chapter for the first taxable year during which this section
does not apply to an eligible foreign corporation by reason
of paragraph (1), there is hereby imposed on the eligible
foreign corporation a tax equal to the recapture amount
described in subparagraph (B).
``(B) Recapture amount.--
``(i) In general.--The recapture amount described in this
subparagraph shall be the sum of the amounts determined for
each of the 4 taxable years preceding the first taxable year
to which this section does not apply by reason of paragraph
(1) by multiplying the qualified tax benefits for each such
year by the following recapture percentage:

``In the case of--                                        The recapture
percentage is--
The immediately preceding taxable year.......................80% ....

The second preceding taxable year............................60% ....

The third preceding taxable year.............................40% ....

The fourth preceding taxable year............................20%.....

``(ii) Qualified tax benefits.--For purposes of this
subparagraph, the term `qualified tax benefits' means, with
respect to any taxable year described in clause (i), an
amount equal to the excess (if any) of--

``(I) the amount of the tax liability which a foreign
corporation would have had for the taxable year under this
chapter and chapter 3 if this section had not applied, over
``(II) the amount of such tax liability for such
corporation for such taxable year without regard to this
paragraph.

``(C) Interest.--
``(i) In general.--In addition to the tax imposed by
subparagraph (A), an eligible foreign corporation shall pay
interest on the recapture amount.
``(ii) Calculation of interest.--The amount of interest
under clause (i) shall be determined--

``(I) at the underpayment rate specified in section 6621,
``(II) separately for each taxable year, and
``(III) for the period beginning on the due date for the
tax return of the corporation for such taxable year (without
regard to extensions) and ending on the due date for the tax
return of the corporation for the first taxable year to which
this section ceases to apply.

``(e) Expanded Affiliated Group.--For purposes of this
section--
``(1) In general.--The term `expanded affiliated group'
means an affiliated group as defined in section 1504(a) but
without regard to paragraphs (2) and (3) of section 1504(b),
except that section 1504(a) shall be applied by substituting
`50 percent' for `80 percent' each place it appears.
``(2) Partnerships.--Such term includes any partnership in
which the eligible foreign corporation or its expanded
affiliated group owns directly or indirectly more than 50
percent of the capital or profit interests.
``(f) Regulations.--The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out
the purposes of this section, including regulations--
``(1) which exclude from qualified headquarters activities
any activities of a type not ordinarily performed by a
corporation performing headquarters activities,
``(2) to apply this section in the case of eligible foreign
corporations that conduct activities in the United States
other than qualified headquarters activities, and
``(3) which prevent qualified foreign corporations from
expanding the benefits available by reason of this paragraph
through intercompany transactions.''
(b) Conforming Amendment.--The table of sections for
subchapter Y of chapter 1 is amended by adding at the end the
following new item:

``Sec. 1400M. No additional corporate income taxes on foreign
corporations relocating headquarters operations to New
York Liberty Zone.''
______

SA 661. Mr. McCAIN (for himself and Mr. Baucus) 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:

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

[[Page S6550]]

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).''.
(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--

[[Page S6551]]

``(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 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.
______

SA 662. Mr. EDWARDS (for himself, Mr. McCain, and Mr. Graham of South
Carolina) 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. ____. REPEAL OF TAX BENEFITS RELATING TO COMPANY-OWNED
LIFE INSURANCE.

Repeal of Tax Benefits Relating to Company-Owned Life
Insurance.--
(1) Inclusion of life insurance investment gains.--Section
72 (relating to annuities; certain proceeds of endowment and
life insurance contracts) is amended by inserting after
subsection (j) the following new subsection:
``(k) Treatment of Certain Company-Owned Life Insurance
Contracts.--In the case of a company-owned life insurance
contract, the income on the contract (as determined under
section 7702(g)) for any taxable year shall be includible in
gross income for such year unless the contract covers the
life solely of individuals who are key persons (as defined in
section 264(e)(3)).''.
(2) Repeal of exclusion for death benefits.--Section 101
(relating to certain death benefits) is amended by adding at
the end the following new subsection:
``(j) Proceeds of Certain Company-Owned Life Insurance.--
Notwithstanding any other provision of this section, there
shall be included in gross income of the beneficiary of a
company-owned life insurance contract (unless the contract
covers the life solely of individuals who are key persons (as
defined in section 264(e)(3)))--
``(1) amounts received during the taxable year under such
contract, less

[[Page S6552]]

``(2) the sum of amounts which the beneficiary establishes
as investment in the contract plus premiums paid under the
contract.

Amounts included in gross income under the preceding sentence
shall be so included under section 72.''.
(3) Effective date.--The amendments made by this subsection
shall apply to contracts entered into after the date of
enactment of this section.
______

SA 663. Mr. BREAUX 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 Sec. 350;
On page 19, line 11, strike ``100'' and insert ``65.''
______

SA 664. Mr. NICKLES (for himself, Mr. Miller, Mr. Kyl, Mr. Lott, Mr.
Bunning, Mr. Crapo, Mr. Graham of South Carolina, Mr. Bennett, Mr.
Frist, Mr. McConnell, Mr. Santorum, Mr. Ensign, Mr. Smith, Mr. Thomas,
Mr. Domenici, and Mr. Allard) 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:

Beginning on page 9, line 16, strike all through page 12,
line 9, and insert:

SEC. 104. ACCELERATION OF INCREASE IN STANDARD DEDUCTION FOR
MARRIED TAXPAYERS FILING JOINT RETURNS.

(a) In General.--Paragraph (7) of section 63(c) (relating
to standard deduction) is amended to read as follows:
``(7) Applicable percentage.--For purposes of paragraph
(2), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning in calendar year--         The applicable
percentage is--
2003...............................................................195
2004...............................................................200
2005...............................................................174
2006...............................................................184
2007...............................................................187
2008...............................................................190
2009 and thereafter.............................................200.''.
(b) Conforming Amendment.--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. 105. ACCELERATION OF 15-PERCENT INDIVIDUAL INCOME TAX
RATE BRACKET EXPANSION FOR MARRIED TAXPAYERS
FILING JOINT RETURNS.

(a) In General.--Subparagraph (B) of section 1(f )(8)
(relating to phaseout of marriage penalty in 15-percent
bracket) is amended to read as follows:
``(B) Applicable percentage.--For purposes of subparagraph
(A), the applicable percentage shall be determined in
accordance with the following table:
``For taxable years beginning in calendar year--         The applicable
percentage is--
2003...............................................................195
2004...............................................................200
2005...............................................................180
2006...............................................................187
2007...............................................................193
2008 and thereafter.............................................200.''.
(b) Conforming Amendment.--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.
Beginning on page 15, line 12, strike all through page 18,
line 11, and insert:

SEC. 107. 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.
On page 19, line 5, insert ``the applicable percentage of''
before ``qualified''.
On page 19, strike lines 7 through 15, and insert:
``(2) Applicable percentage.--For purposes of this
subsection, the applicable percentage is--
``(A) 50 percent in the case of taxable years beginning in
2003,
``(B) 100 percent in the case of taxable years beginning in
2004, 2005, and 2006, and
``(C) zero percent in the case of any other taxable year.
On page 21, beginning with line 21, strike all through page
22, line 2, and redesignate accordingly.
On page 26, strike lines 17 through 22, and insert:
(4) Section 531 is amended--
(A) by inserting ``the taxable percentage of'' after
``equal to'', and
(B) by adding at the end the following: ``For purposes of
this section, the taxable percentage is 100 percent minus the
applicable percentage (as defined in section 116(a)(2)).''
(5) Section 541 is amended--
(A) by inserting ``the taxable percentage of'' after
``equal to'', and
(B) by adding at the end the following: ``For purposes of
this section, the taxable percentage is 100 percent minus the
applicable percentage (as defined in section 116(a)(2)).''
On page 27, between lines 16 and 17, insert:
(9)(A) Section 1059(a) is amended by striking
``corporation'' each place it appears and inserting
``taxpayer''.
(B)(i) The heading for section 1059 is amended by striking
``CORPORATE''.
(ii) The item relating to section 1059 in the table of
sections for part IV of subchapter O of chapter 1 is amended
by striking ``Corporate shareholder's'' and inserting
``Shareholder's''.
On page 27, line 19, strike ``2003'' and insert ``2002''.
______

SA 665. Mr. REID (for himself and Mr. Graham 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; as follows:
At the end of subtitle C of title V, add the following:

SEC. ____. RESTORATION OF DEDUCTION FOR TRAVEL EXPENSES OF
SPOUSE, ETC. ACCOMPANYING TAXPAYER ON BUSINESS
TRAVEL.

(a) In General.--Subsection (m) of section 274 (relating to
additional limitations on travel expenses) is amended by
striking paragraph (3)(A).
(b) Effective Date.--The amendment made by this section
shall apply to amounts paid or incurred after the date of the
enactment of this Act, and on or before December 31, 2004.
______

SA 666. Mr. DORGAN 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 8, strike the matter preceding line 1, and insert:

[[Page S6553]]

------------------------------------------------------------------------
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%     35.4%
2004 and thereafter............    25.0%     28.0%     33.0%    35.0%''.
------------------------------------------------------------------------

Strike section 357.
______

SA 667. Mrs. BOXER 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. ____. CHILD SUPPORT ENFORCEMENT.

(a) Inclusion in Income of Amount of Unpaid Child
Support.--Section 108 (relating to discharge of indebtedness
income) is amended by adding at the end the following new
subsection:
``(h) Unpaid Child Support.--
``(1) In general.--For purposes of this chapter, any unpaid
child support of a delinquent debtor for any taxable year
shall be treated as amounts includible in gross income of the
delinquent debtor for the taxable year.
``(2) Definitions.--For the purposes of this subsection--
``(A) Child support.--The term `child support' means--
``(i) any periodic payment of a fixed amount, or
``(ii) any payment of a medical expense, education expense,
insurance premium, or other similar item,
which is required to be paid to a custodial parent by an
individual under a support instrument for the support of any
qualifying child of such individual. `Child support' does not
include any amount which is described in section 408(a)(3) of
the Social Security Act and which has been assigned to a
State.
``(B) Custodial parent.--The term `custodial parent' means
an individual who is entitled to receive child support and
who has registered with the appropriate State office of child
support enforcement charged with implementing section 454 of
the Social Security Act.
``(C) Delinquent debtor.--The term `delinquent debtor'
means a taxpayer who owes unpaid child support to a custodial
parent.
``(D) Qualifying child.--The term `qualifying child' means
a child of a custodial parent with respect to whom a
dependent deduction is allowable under section 151 for the
taxable year (or would be so allowable but for paragraph (2)
or (4) of section 152(e)).
``(E) Support instrument.--The term `support instrument'
means--
``(i) a decree of divorce or separate maintenance or a
written instrument incident to such a decree,
``(ii) a written separation agreement, or
``(iii) a decree (not described in clause (i)) of a court
or administrative agency requiring a parent to make payments
for the support or maintenance of 1 or more children of such
parent.
``(F) Unpaid child support.--The term `unpaid child
support' means child support that is payable for months
during a custodial parent's taxable year and unpaid as of the
last day of such taxable year, provided that such unpaid
amount as of such day equals or exceeds one-half of the total
amount of child support due to the custodial parent for such
year.
``(3) Coordination with other laws.--Amounts treated as
income by paragraph (1) shall not be treated as income by
reason of paragraph (1) for the purposes of any provision of
law which is not an internal revenue law.''.
(b) Effective Date; Implementation.--The amendments made by
is section shall apply to taxable years beginning after
December 31, 2002. The Secretary of the Treasury shall
publish Form 1099-CS (or such other form that may be
prescribed to comply with the amendment made by subsection
(b)(1)) and regulations, if any, that may be deemed necessary
to carry out the purposes of this Act, not later than 90 days
after the date of enactment of this Act.
______

SA 668. Mr. DORGAN 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:

SEC. ____. ENSURING DEFICIT REDUCTION.

(a) Trigger.--Notwithstanding any other provision of this
Act, the provisions as described in subsection (b) shall take
effect only as provided in subsection (c).
(b) Provision Described.--A provision of this Act described
in this subsection is--
(1) a provision of this Act that 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) a provision of this Act that provides a 50 percent
dividends exclusion between December 31, 2002, and December
31, 2003, and a 100 percent dividends exclusion between
December 31, 2003 and December 31, 2006.
(c) Delay.--
(1) In general.--Each year when the final monthly Treasury
report for the most recently ended fiscal year is released,
the Secretary of the Treasury shall certify whether the on-
budget deficit exceeds $300,000,000,000 for such year.
(2) Effective date.--The provisions described in subsection
(b) shall become effective on January 1 in the calendar year
following the issuance of the final Treasury report only if
the Secretary has determined that the on-budget deficit is
$300,000,000,000 or less for the recently ended fiscal year.
(d) Discretionary Spending Limitation.--
(1) In general.--Notwithstanding any other provision of
law, in any fiscal year subject to the delay provisions of
subsection (c)--
(A) the amount of budget authority for discretionary
spending for Federal agency administrative overhead expenses
shall be limited to the level in the preceding fiscal year
minus 5 percent; and
(B) with respect to a second or subsequent consecutive
fiscal year subject to this subsection, the amount of budget
authority for discretionary spending for Federal agency
administrative overhead expenses shall be limited to the
level in the preceding fiscal year.
(2) Definition.--In this subsection, the term
``administrative overhead expenses'' mean costs of resources
that are jointly or commonly used to produce 2 or more types
of outputs but are not specifically identifiable with any of
the outputs. Administrative overhead expenses include general
administrative services, general research and technology
support, rent, employee health and recreation facilities, and
operating and maintenance costs for buildings, equipment, and
utilities.
______

SA 669. Mr. DURBIN 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. ____. 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.
``(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.--

[[Page S6554]]

``(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 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

[[Page S6555]]

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.--
``(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.

[[Page S6556]]

``(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 670. Mr. SANTORUM (for himself and Mr. Nelson of Nebraska)
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 title II and insert:

TITLE II--DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF CORPORATE
EARNINGS

SEC. 201. DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION OF
CORPORATE EARNINGS.

(a) In General.--Part III of subchapter B of chapter 1 is
amended by inserting after section 115 the following new
section:

``SEC. 116. DIVIDEND EXCLUSION TO ELIMINATE DOUBLE TAXATION
OF CORPORATE EARNINGS.

``(a) Exclusion.--Gross income does not include the
excludable portion (as defined in section 281) of any amount
received as a dividend.
``(b) Reporting to Shareholders.--For reporting to
shareholders, see section 6042.''
(b) Clerical Amendment.--The table of sections for such
part III is amended by inserting after the item relating to
section 115 the following new item:

``Sec. 116. Dividend exclusion to eliminate double taxation of
corporate earnings.''

SEC. 202. RULES FOR APPLICATION OF DIVIDEND EXCLUSION.

(a) In General.--Subchapter B of chapter 1 (as amended by
subsection (d)) is amended by inserting after part IX the
following new part:

``PART X--RULES FOR APPLICATION OF DIVIDEND EXCLUSION

``Sec. 281. Excludable portion of dividends.

[[Page S6557]]

``Sec. 282. Special rules for credits and refunds.
``Sec. 283. Special rules for foreign corporations and shareholders.
``Sec. 284. Other special rules.
``Sec. 285. Regulations.
``Sec. 286. Phasein and Termination.

``SEC. 281. EXCLUDABLE PORTION OF DIVIDENDS.

``(a) Excludable Portion.--For purposes of section 116, the
term `excludable portion' means, with respect to any dividend
paid by a corporation in a calendar year, an amount which
bears the same ratio to such dividend as the excludable
dividend amount of such corporation for the calendar year
bears to the total amount of dividends paid by such
corporation in such calendar year.
``(b) Excludable Dividend Amount.--For purposes of this
part and section 116--
``(1) In general.--The term `excludable dividend amount'
means, with respect to any corporation for any calendar year,
the excess of--
``(A) the sum of--
``(i) the fully taxed earnings amount for the preceding
calendar year, and
``(ii) the aggregate amount of dividends received by the
corporation during such preceding year which are excluded
from gross income under section 116(a), over
``(B) the amount of applicable income tax taken into
account under subparagraph (A)(i).
``(2) Carryover of excess of excludable dividend amount
over dividends paid.--The excludable dividend amount of a
corporation for any calendar year shall be increased by the
excess of--
``(A) the excludable dividend amount of such corporation
for the preceding calendar year, over
``(B) the aggregate amount paid by the corporation as
dividends during such preceding calendar year.
``(c) Fully Taxed Earnings Amount.--
``(1) In general.--The fully taxed earnings amount for any
calendar year is the amount of the applicable income tax
shown on applicable returns for such year divided by the
highest rate of tax specified in section 11.
``(2) Increase for prior year assessments.--The fully taxed
earnings amount for any calendar year shall be increased by
the amount of any applicable income tax (not previously taken
into account under paragraph (1)) which is assessed during
such year divided by the highest rate of tax specified in
section 11.
``(3) Limitation to amount paid.--If an amount described in
paragraph (1) or (2) is paid after the close of the calendar
year in which such amount would (but for this paragraph) be
taken into account, such amount shall be taken into account
for the calendar year in which paid.
``(4) Highest rate of tax.--For purposes of this
subsection, the highest rate of tax specified in section 11
with respect to any applicable income tax shall be such
highest rate for the taxable year for which (or by reference
to which) such tax is determined.
``(d) Definitions.--For purposes of this part--
``(1) Applicable income tax.--
``(A) In general.--The term `applicable income tax' means
the excess (if any) of--
``(i) the sum of the taxes imposed by sections 11, 55, 511,
801, 831, 882, 1201, 1291 (without regard to section
1291(c)(1)(B)), and 1374, over
``(ii) the sum of the credits under part IV of subchapter A
(other than subpart C and section 27(a)).
``(B) Transitional rules.--
``(i) In general.--Such term shall not include any tax
imposed for any taxable year ending before April 1, 2001.
``(ii) Treatment of minimum tax credit.--The applicable
income tax shall not be reduced by the credit under section
53 attributable (determined as if such credit were used on a
first-in first-out basis) to taxable years ending before
April 1, 2001.
``(iii) Section 1374.--The reference to section 1374 in
subparagraph (A)(i) shall not apply to taxable years
beginning before January 1, 2003.
``(iv) Other taxes included.--The taxes imposed by sections
531 and 541 (as in effect before their repeal) shall be taken
into account under subparagraph (A)(i) for taxable years
ending after March 31, 2001, and beginning before January 1,
2004.
``(2) Applicable return.--
``(A) In general.--The term `applicable return' means, with
respect to a calendar year, any return of applicable income
tax for a taxable year if the 15th day of the 9th month
following the close of such taxable year occurs during such
calendar year.
``(B) Filing requirement.--If a return is filed after the
close of the calendar year with respect to which such return
would (but for this subparagraph) be treated as an applicable
return under subparagraph (A), such return shall be treated
as an applicable return for the calendar year in which filed.

``SEC. 282. SPECIAL RULES FOR CREDITS AND REFUNDS.

``(a) In General.--No overpayment of an applicable income
tax by a corporation may be allowed as a credit or refund to
the extent that the overpayment exceeds the sum of--
``(1) the aggregate applicable income taxes otherwise taken
into account under section 281 for determining the excludable
dividend amount for the calendar year succeeding the calendar
year in which the credit or refund would otherwise be allowed
or made, and
``(2) an amount equal to the lesser of--
``(A) the product of the corporation's excludable dividend
amount for such calendar year and the fraction the numerator
of which is the highest rate of tax specified in section 11
(within the meaning of section 281(c)(4)) and the denominator
of which is 1 minus such highest rate, or
``(B) the amount specified by the corporation for purposes
of this paragraph.
``(b) Adjustments to Excludable Dividend Amounts Resulting
From Credits and Refunds.--If subsection (a) applies to any
credit or refund which is allowed or made in a calendar
year--
``(1) the applicable income taxes described in subsection
(a)(1) otherwise taken into account under section 281 for
determining the excludable dividend amount for the succeeding
calendar year shall be reduced (but not below zero) by the
amount of the credit or refund, and
``(2) the excludable dividend amount for the calendar year
shall be reduced by the excess of--
``(A) the amount determined under subsection (a)(2) divided
by the highest rate of tax specified in section 11, over
``(B) the amount determined under subsection (a)(2).
``(c) Disallowed Overpayment Not Lost.--Nothing in
subsection (a) shall be construed to reduce the amount of any
overpayment for which credit or refund is not allowed by
reason of subsection (a), and such overpayment shall continue
to be taken into account in applying subsection (a) for
succeeding calendar years until a credit or refund is allowed
or made.
``(d) Exception for Foreign Tax Credit.--This section shall
not apply to any overpayment to the extent that such
overpayment is attributable to the credit allowed under
section 27(a).
``(e) Denial of Interest.--No interest shall be allowed on
any overpayment during the period that credit or refund of
such overpayment is not allowed by reason of this section.

``SEC. 283. SPECIAL RULES FOR FOREIGN CORPORATIONS AND
SHAREHOLDERS.

``(a) Computation of Excludable Dividend Amounts of Foreign
Corporations.--
``(1) Reduction in excludable dividend amount for certain
taxes.--The reduction under section 281(b)(1)(B) (without
regard to this subparagraph) shall be increased by the sum
of--
``(A) the taxes imposed by section 884 (relating to branch
profits tax), and
``(B) so much of the taxes imposed by section 881 as are
attributable to dividends which would (but for subsection
(b)) be excludable under section 116.
``(2) Treatment of disallowed exclusions.--Notwithstanding
subsection (b), the excludable dividend amount of a foreign
corporation for a calendar year shall be increased by the
dividends received by the corporation which (but for
subsection (b)) would be excludable under section 116(a).
``(b) Taxation of Foreign Shareholders.--In the case of a
shareholder who is a nonresident alien individual or a
foreign corporation, no dividends shall be excludable under
section 116(a).
``(c) Rules Relating to Foreign Tax Credit.--
``(1) In general.--No credit shall be allowed under section
901 for any taxes paid or accrued (or deemed paid under
section 902 or 960) with respect to any dividend excludable
under section 116.
``(2) Excludable dividend amount.--The excludable dividend
amount of a corporation for any calendar year shall be
determined without regard to a reduction in the credit
allowed by section 27(a) on an applicable return for a prior
calendar year.

``SEC. 284. OTHER SPECIAL RULES.

``(a) Redemptions.--If a corporation makes a distribution
to a shareholder during any calendar year with respect to its
stock and section 301 does not apply to such distribution,
the excludable dividend amount as of the beginning of the
calendar year shall be reduced by the ratable share of such
amounts attributable to the stock so redeemed.
``(b) Coordination With Section 246(c).--
``(1) Holding period requirements.--If a shareholder
disposes of any share of stock before the holding period
requirements of section 246(c) are met, the basis of such
share shall be reduced by the amount of dividends received
with respect to such share which are excludable under section
116(a).
``(2) Related payments.--No deduction shall be allowed
under this chapter for any related payments described in
section 246(c)(1)(B) with respect to any dividend excludable
under section 116(a) with respect to any share of stock to
the extent that such payments do not exceed the amount of
such dividend or basis increase.
``(3) Treatment of disallowed exclusions and adjustments.--
The excludable dividend amount of any corporation for a
calendar year, and its earnings and profits, shall not be
increased by the dividends received by the corporation which
are excludable under section 116(a) and which resulted in a
basis reduction under paragraph (1).
``(c) Treatment of Regulated Investment Companies and Real
Estate Investment Trusts.--
``(1) In general.--Except as provided in regulations, the
excludable dividend amount of a regulated investment company
or real estate investment trust shall be zero.
``(2) Cross reference.--

[[Page S6558]]

``For special rules relating to application of this part to regulated
investment companies and real estate investment trusts, see section
852(g).

``(d) Exclusion Reduced Where Portfolio Stock Held by
Corporation is Debt-Financed.--
``(1) Treatment of excludable dividend.--In the case of any
debt-financed portfolio stock (within the meaning of section
246A) held by a corporation, the amount excluded under
section 116(a) with respect to any dividend received with
respect to such stock shall be an amount equal to the product
of--
``(A) the amount which would be excluded under section
116(a) without regard to this paragraph, and
``(B) 100 percent minus the average indebtedness percentage
(within the meaning of section 246A(d)).
``(2) Limitation.--The aggregate amount of reductions under
paragraph (1) with respect to any debt-financed portfolio
stock shall not exceed the amount of interest deduction
(including any deductible short sale expense) allocable to
such stock.
``(3) Exception.--This subsection shall not apply to any
dividend described in paragraph (1) or (2) of section
246A(b).
``(e) Treatment of Variable Annuity Contracts.--
``(1) In general.--A life insurance company may allocate
(at such time and manner as the Secretary shall prescribe) to
a qualified variable annuity contract based on a segregated
asset account dividends received which would (but for section
803(c)) be excludable under section 116(a) with respect to
stock held in such account.
``(2) Treatment of amounts allocated.--
``(A) Amounts allocated on or before annuity starting
date.--Any amount allocated under paragraph (1) to a contract
on or before the annuity starting date shall be treated for
purposes of section 72 as an additional investment in the
contract.
``(B) Amounts allocated after annuity starting date.--If
any amount is allocated under paragraph (1) to a contract
after the annuity starting date, the amounts otherwise
includible in gross income with respect to amounts received
as an annuity under such contract after the date of such
allocation shall be reduced by the amount so allocated.
``(3) Qualified variable annuity contract.--For purposes of
this subsection, the term `qualified variable annuity
contract' means any annuity contract described in section
817(d)(3)(A). Such term shall not include a pension plan
contract (within the meaning of section 818).
``(4) Information reporting.--The Secretary may require
such reporting as may be appropriate for purposes of this
paragraph.
``(f) Cooperatives.--In the case of a cooperative to which
subchapter T applies--
``(1) the excludable dividend amount of such cooperative
shall be allocated for purposes of section 116 and this part
between shares of such cooperative held by patrons and shares
held by other persons in such manner as the Secretary shall
prescribe by regulations, and
``(2) no deduction shall be allowed to the cooperative
under this chapter for any dividend paid to a patron which is
excludable under section 116(a).
``(g) ESOP Stock.--Any dividend allowed as a deduction
under section 404(k) shall not be treated as a dividend for
purposes of section 116 and this part.

``SEC. 285. REGULATIONS.

``The Secretary shall prescribe such regulations as may be
appropriate to carry out section 116 and this part, including
regulations--
``(1) providing for the treatment of options and
convertible debt as stock, including modification of the
attribution rules under section 318(a)(4),
``(2) providing for the allocation of the excludable
dividend amount in the case of transactions described in
section 312(h),
``(3) waiving the application of section 246(c)(4) for
purposes of sections 284(b) and 1059(g),
``(4) modifying the consolidated return regulations to the
extent necessary or appropriate to apply the provisions of
this part, including regulations that accelerate the
inclusion in the excludable dividend amount of a higher-tier
member with respect to--
``(A) activities of lower-tier members of the group, and
``(B) dividends excludable under section 116(a) received
from such lower-tier members,
``(5) providing for the application of section 116 and this
part in the case of pass-thru entities, including appropriate
adjustments to basis, and
``(6) as are necessary to further the purposes of section
116 and this part and to prevent the circumvention of such
purposes.

Any regulations under paragraph (4) may be effective as of
the effective date of this part.

``SEC. 286. PHASEIN AND TERMINATION.

``(a) Phasein of Excludable Dividend Amount.--In computing
the excludable dividend amount for any calendar year, only 50
percent of the applicable income taxes for a taxable year
beginning before April 1, 2002, shall be taken into account.
``(b) Termination.--
``(1) In general.--Except as provided in this subsection,
section 116 and this part shall not apply to any calendar
year after calendar year 2006, and the excludable dividend
amount for any such year shall be zero.
``(2) Credits and refunds.--Section 282 shall apply to any
credit or refund after December 31, 2006, of an applicable
income tax taken into account in determining the excludable
dividend account for calendar year 2003, 2004, 2005, or
2006.''.
(b) Reporting of Excludable Dividends.--
(1) In general.--Section 6042(a) (relating to returns
regarding payments of dividends and corporate earnings and
profits) is amended to read as follows:
``(a) Requirement of Reporting.--
``(1) In general.--Every person--
``(A) who makes payments of dividends aggregating $10 or
more to any other person during any calendar year, or
``(B) who receives such payments of dividends as a nominee
and who makes payments aggregating $10 or more during any
calendar year to any other person with respect to the
dividends received,

shall make a return at the time and in the manner prescribed
by the Secretary, setting forth the information described in
paragraph (3).
``(2) Returns required by secretary.--Every person who
makes payments of dividends to which paragraph (1) does not
apply shall, when required by the Secretary, make a return
setting forth the information described in paragraph (3).
``(3) Information reported.--Information described in this
paragraph includes--
``(A) the aggregate amount of dividends, including the
portion of such amount excludable from gross income under
section 116(a), and
``(B) such other information as the Secretary may require.

In the case of a nominee described in paragraph (1)(B), this
paragraph shall apply with respect to the payments and
allocations made by the nominee.''
(2) Application to foreign persons.--Section 6042 is
amended by adding at the end the following new subsection:
``(e) Application to Foreign Persons.--The Secretary may
provide for the application of this section to payments,
allocations, and distributions made by or to a foreign person
to the extent necessary to carry out the provisions of
section 116 and part X of subchapter B of chapter 1.''
(3) Conforming amendment.--Section 6042(c)(2) is amended to
read as follows:
``(2) the information described in subsection (a)(3)
required to be shown on the return.''
(c) Amendments to Other Sections.--
(1) Minimum tax.--Clause (i) of section 56(g)(4)(B) is
amended by striking ``or under section 114'' and inserting
``, section 114, or section 116''.
(2) Coordination with dividend received deductions.--
(A) Section 246 is amended by adding at the end the
following new subsection:
``(f) Coordination With Dividend Exclusion.--No deduction
shall be allowed under section 243, 244, or 245 with respect
to the amount of any dividend excluded from gross income
under section 116 or would be so excluded but for sections
283(b) and 284(d).''
(B) Section 243 is amended by adding at the end the
following new subsection:
``(f) Termination.--Paragraph (1) of subsection (a) shall
not apply to any dividend received by a corporation after
December 31, 2005.''
(3) Carryovers in certain corporation acquisitions.--
Section 381(c) is amended by adding at the end the following
new paragraph:
``(27) Excludable dividend amount.--The acquiring
corporation shall take into account (to the extent proper to
carry out the purposes of this section, section 116, and part
X of subchapter B, and under such regulation as may be
prescribed by the Secretary) the excludable dividend amount
in respect of the distributor or transferor.''
(4) Trusts and estates.--Subsection (a) of section 643 is
amended--
(A) by redesignating paragraph (7) as paragraph (8) and by
inserting after paragraph (6) the following new paragraph:
``(7) Dividends, etc.--There shall be included the amount
of any dividends excluded from gross income under section
116.'', and
(B) by striking ``and (6)'' in the last sentence and
inserting ``, (6), and (7)''.
(5) Partnerships.--Paragraph (5) of section 702(a) is
amended to read as follows:
``(5) dividends with respect to which there is an exclusion
under section 116 or a deduction under part VIII of
subchapter B,''.
(6) Extraordinary dividends.--
(A) In general.--Section 1059 is amended by redesignating
subsection (g) as subsection (h) and by inserting after
subsection (f) the following new subsection:
``(g) Treatment of Excludable Dividends as Extraordinary
Dividends.--
``(1) In general.--For purposes of this section, any
dividend excludable under section 116(a) shall be treated as
an extraordinary dividend, except that this section shall be
applied by substituting `1 year (or such other period as the
Secretary may prescribe)' for `2 years' each place it
appears.
``(2) Treatment of deemed extraordinary dividends.--The
excludable dividend amount of any corporation for a calendar
year, and its earnings and profits, shall not be increased by
the dividends received by the corporation which are treated
as extraordinary dividends by reason of paragraph (1).
``(3) Coordination with section 284(b).--This section shall
not apply to any dividend excludable under section 116(a)
with respect to which section 284(b) applies.

[[Page S6559]]

``(4) Regulations.--The Secretary may by regulation provide
for exceptions to the application of paragraph (1).''
(B) Paragraph (3) of section 1059(d) is amended by
inserting ``section 1223(11) shall not apply and'' after
``subsection (a),''.
(C)(i) Section 1059 is amended by striking ``corporation''
each place it appears in subsection (a) and inserting
``taxpayer''.
(ii) The section heading for section 1059 is amended by
striking ``CORPORATE'' and by inserting ``AND EXCLUDABLE''
before ``DIVIDENDS''.
(iii) The item relating to section 1059 in the table of
sections for part IV of subchapter O of chapter 1 is
amended--
(I) by striking ``Corporate'' and inserting
``Shareholder's'', and
(II) by inserting ``and excludable'' before ``dividends''.
(7) Private foundations.--Section 4940(c) is amended by
adding at the end the following new paragraph:
``(6) Coordination with dividend exclusion.--For purposes
of this section, gross investment income shall not include a
dividend to the extent excluded from gross income under
section 116(a).''
(d) Conforming Amendments.--
(1)(A) Part X of subchapter B of chapter 1, as in effect on
the day before the date of the enactment of this Act, is
hereby moved after part XI of such subchapter B and
redesignated as part XII.
(B) Section 281, as so in effect, is redesignated as
section 296.
(C) The table of sections for such part XII, as so
designated, is amended by striking ``Sec. 281'' and inserting
``Sec. 296.''
(D) The table of parts for subchapter B of chapter 1 is
amended by striking the items relating to parts X and XI and
inserting the following new items:

``Part X. Rules for application of dividend exclusion.
``Part XI. Special rules relating to corporate preference items.
``Part XII. Terminal railroad corporations and their shareholders.''

(2) Subsection (f) of section 301 is amended by adding at
the end the following new paragraph:
``(4) For exclusion from gross income of certain dividends,
see section 116.''

SEC. 203. TREATMENT OF REGULATED INVESTMENT COMPANIES AND
REAL ESTATE INVESTMENT TRUSTS.

(a) In General.--Section 852 is amended by adding at the
end the following new subsection:
``(g) Special Rules Relating to Section 116 and Part X of
Subchapter B.--
``(1) Excludable portion.--
``(A) In general.--For purposes of section 116(a), the
excludable portion of any dividend paid by any qualified
investment entity shall be the amount so designated by such
entity in a written notice mailed to its shareholders not
later than 60 days after the close of its taxable year in
which such dividend is paid.
``(B) Limitation.--If the aggregate amount so designated
with respect to a taxable year (including dividends paid
after the close of the taxable year as described in section
855) exceeds the aggregate amount of dividends received by
such entity during such year which are excludable from gross
income under section 116(a), then the amount of a dividend
otherwise excludable by reason of a designation under
subparagraph (A) shall be reduced by an amount which bears
the same ratio to the amount otherwise excludable as such
excess bears to the total amount designated under
subparagraph (A).
``(C) Treatment of capital gain and exempt-interest
dividends.--Any amount designated under subparagraph (A) as
excludable under section 116 may not be treated as a capital
gain dividend or an exempt-interest dividend.
``(D) Coordination with section 853.--The election under
section 853 shall not apply to dividends excludable under
section 116 received by a qualified investment entity.
``(2) Definitions.--For purposes of this subsection--
``(A) Qualified investment entity.--The term `qualified
investment entity' means--
``(i) a regulated investment company, and
``(ii) a real estate investment trust.
``(B) Exempt-interest dividend.--The term `exempt-interest
dividend' has the meaning given to such term by subsection
(b)(5).''
(b) Other Rules Relating to Regulated Investment
Companies.--
(1) Distribution requirements.--Clause (i) of section
852(a)(1)(B) is amended by inserting ``and its dividend
income excludable under section 116(a),'' before ``over''.
(2) Taxation of entity and shareholders.--
(A) The material following paragraph (3) of section 851(b)
is amended by inserting ``and dividends excludable from gross
income under section 116(a)'' after ``103(a)'' in the third
sentence.
(B) Section 852(b)(2)(D) is amended by striking ``and
exempt-interest dividends'' and inserting ``, exempt-interest
dividends, and any dividends excludable under section
116(a)''.
(C) Subparagraph (B) of section 852(b)(4) is amended to
read as follows:
``(B) Loss attributable to exempt dividends.--If--
``(i) a shareholder of a regulated investment company
receives an exempt-interest dividend or a dividend excludable
under section 116(a) with respect to any share, and
``(ii) such share is held by the taxpayer for 6 months or
less,

then any loss on the sale or exchange of such share shall, to
the extent of the sum of the amounts of such dividends be
disallowed.''
(D) Paragraph (3) of section 4982(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 new
subparagraph:
``(C) any dividend excludable from gross income under
section 116(a).''
(c) Other Rules Relating to Real Estate Investment
Trusts.--
(1) Distribution requirements.--Subparagraph (A) of section
857(a)(1) is amended by striking ``and'' at the end of clause
(i), by striking ``minus'' at the end of clause (ii), and by
inserting at the end the following new clause:
``(iii) 90 percent of its dividend income excludable under
section 116(a); minus''
(2) Taxation of entity and shareholders.--
(A)(i) Section 856(c)(2) is amended--
(I) by inserting ``(including dividends excludable from
gross income under section 116(a))'' after ``dividends'' in
subparagraph (A), and
(II) by inserting ``(including tax-exempt interest)'' after
``interest'' in subparagraph (B).
(ii) Section 856(c) is amended by adding at the end the
following new paragraph:
``(8) Gross income tests.--For purposes of paragraphs (2)
and (3), gross income shall be treated as including tax-
exempt interest and dividends excludable from gross income
under section 116(a).''
(B) Section 857(b)(2)(B) is amended by inserting `` or any
dividends paid which are excludable under section 116(a)''
after ``subparagraph (D)''.
(C) Section 857(b) is amended by adding at the end the
following new paragraph:
``(10) Loss attributable to exempt dividends.--If--
``(A) a taxpayer receives a dividend excludable under
section 116(a) with respect to any share of stock of, or a
certificate of beneficial interest in, a real estate
investment trust, and
``(B) such share or certificate is held by the taxpayer for
6 months or less,

then any loss on the sale or exchange of such share or
certificate shall, to the extent of the sum of the amounts of
such dividends, be disallowed.''
(D) Paragraph (1) of section 4981(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 new
subparagraph:
``(C) any dividend excludable from gross income under
section 116(a).''

SEC. 204. TREATMENT OF INSURANCE COMPANIES.

(a) Life Insurance Companies.--
(1) Section 803 is amended by adding at the end the
following new subsection:
``(c) Special Rules for Excludable Dividends.--
``(1) In general.--The exclusion under section 116(a) with
respect to any dividend received by a life insurance company
shall only apply to such company's share (as determined under
section 812) of such dividend.
``(2) Rules for segregated asset accounts.--In the case of
stock held in a segregated asset account (within the meaning
of section 817), this subsection shall be applied as if the
policyholders' share of the excludable portion of any
dividend with respect to such stock were 100 percent.
``(3) Computation of excludable dividend amount.--In the
case of a life insurance company, the increase under clause
(ii) of section 281(b)(1)(A) in the company's excludable
dividend amount shall be limited to the company's share (as
determined under section 812) of the dividends described in
such clause.''
(2) Section 812(d)(1)(A) is amended by inserting
``(including dividends excludable under section 116(a))''
after ``dividends''.
(3) Section 815(c)(2)(A)(iii) is amended by adding ``and
the amount of dividends excludable under section 116(a) (as
modified by section 803(c)(1)),'' after ``section 103''.
(b) Other Insurance Companies.--
(1) Section 832(b)(5)(B) is amended by striking ``and'' at
the end of clause (ii), by striking the period at the end of
clause (iii) and inserting ``, and'', and by adding after
clause (iii) the following new clause:
``(iv) any dividend excludable under section 116(a) which
is received during such taxable year.''
(2) Section 832(c) is amended by striking ``and'' at the
end of paragraph (12), by striking the period at the end of
paragraph (13) and inserting ``; and'', and by adding at the
end the following new paragraph:
``(14) the amount of dividends received during the taxable
year which are excluded from gross income under section
116(a).''
(3) Section 833(b)(3)(E) is amended--
(A) by striking ``and'' at the end of clause (i), by
striking the period at the end of clause (ii) and inserting
``, and'', and by inserting after clause (ii) the following
new clause:
``(iii) the aggregate amount excluded for the taxable year
under section 116(a).'', and
(B) by adding at the end the following: ``The amount
determined under clause (iii) shall be reduced by the amount
of any decrease in such deductions for the taxable year by
reason of section 832(b)(5)(B) to the

[[Page S6560]]

extent such decrease is attributable to the exclusion under
section 116(a).''
(4) Section 834(c) is amended by adding at the end the
following new paragraph:
``(10) Excludable dividends.--The amount of dividends
received during the taxable year which are excluded from
gross income under section 116(a).''

SEC. 205. TREATMENT OF S CORPORATIONS.

(a) Application of Section 116 and Part X of Subchapter B
to S Corporations.--Section 1368 is amended by adding at the
end the following new subsection:
``(f) Coordination With Dividend Exclusion.--
``(1) Determination of excluded dividends amount.--
``(A) In general.--Clause (ii) of section 281(b)(1)(A)
shall not apply to amounts received or allocated in a taxable
year for which the corporation is an S corporation.
``(B) Cross reference.--

``For treatment of taxes imposed by section 1374, see section
281(d)(1).

``(2) Distributions.--Subject to regulations prescribed by
the Secretary, the preceding provisions of this section shall
not apply to any dividend excludable from gross income under
section 116(a).''
(c) Modification to Treatment of Section 1374 Tax.--
(1) Paragraph (2) of section 1366(f) is amended to read as
follows:
``(2) Treatment of built-in gains.--The amount of the items
of the net recognized built-in gain taken into account under
section 1374(b)(1) (reduced by any deduction allowed under
section 1374(b)(2)) shall not be taken into account under
this section.''
(2)(A) Subsection (c) of section 1371 is amended by adding
at the end the following new paragraph:
``(4) Treatment of built-in gain.--The accumulated earnings
and profits of the corporation shall be increased at the
beginning of the taxable year by the amount not taken into
account under section 1366 by reason of section 1366(f)(2)
(determined without regard any reduction of such amount under
section 1374(b)(2)) reduced by the tax imposed by section
1374 (net of credits allowed).''
(B) Paragraph (1) of section 1371(c) is amended by striking
``and (3)'' and inserting ``, (3), and (4)''.
(d) Repeal of Tax and Termination Where Excess Passive
Investment Income.--
(1) Repeal of tax.--
(A) In general.--Section 1375 is repealed.
(B) Conforming amendments.--Sections 26(b)(2)(J) and
1366(f)(3) are repealed.
(2) Repeal of termination.--Section 1362(d) is amended by
striking paragraph (3).
(e) Treatment of Accumulated Adjustments Account.--
Subsection (e) of section 1368 is amended by adding at the
end the following new paragraph:
``(4) Treatment of certain distributions.--The accumulated
adjustments account for any taxable year shall be increased
by the sum of the dividends excludable under section 116(a)
received by the corporation during such taxable year.''

SEC. 206. REPEAL OF ACCUMULATED EARNINGS TAX AND PERSONAL
HOLDING COMPANY TAX.

(a) In General.--Parts I and II of subchapter G of chapter
1 (relating to corporations improperly accumulating surplus
and to personal holding companies) are hereby repealed.
(b) Conforming Amendments.--
(1) Section 12 is amended by striking paragraph (2) and by
redesignating paragraphs (3), (4), (5), (6), and (7) as
paragraphs (2), (3), (4), (5), and (6), respectively.
(2) Section 26(b)(2) is amended by striking subparagraphs
(F) and (G).
(3) Section 30A(c) is amended by inserting ``or'' at the
end of paragraph (1), by striking paragraphs (2) and (3), and
by redesignating paragraph (4) as paragraph (2).
(4) Section 41(e)(7)(E) is amended by adding ``and'' at the
end of clause (i), by striking clause (ii), and by
redesignating clause (iii) as clause (ii).
(5) Section 56(b)(2) is amended by striking subparagraph
(C) and by redesignating subparagraph (D) as subparagraph
(C).
(6) Section 111 is amended by striking subsection (d).
(7) Section 170(e)(4)(D) is amended by adding ``and'' at
the end of clause (i), by striking clause (ii), and by
redesignating clause (iii) as clause (ii).
(8) Sections 170(f)(10)(A), 508(d), 4947, and 4948(c)(4)
are each amended by striking ``545(b)(2),'' each place it
appears.
(9)(A) Section 316(b) is amended by striking paragraph (2)
and by redesignating paragraph (3) as paragraph (2).
(B) Section 331(b) is amended by striking ``(other than a
distribution referred to in paragraph (2)(B) of section
316(b))''.
(10) Section 341(d) is amended--
(A) by striking ``section 544(a) (relating to personal
holding companies)'' and inserting ``section 465(f) (relating
to constructive ownership rules)'', and
(B) by inserting before the period at the end of the next
to the last sentence ``and such paragraph (2) shall be
applied by inserting `or by or for his partner' after `his
family' ''.
(11) Section 381(c) is amended by striking paragraphs (14)
and (17).
(12) Section 443(e) is amended by striking paragraphs (1)
and (2) and by redesignating paragraphs (3), (4), and (5) as
paragraphs (1), (2), and (3), respectively.
(13) Section 447(g)(4)(A) is amended by striking ``other
than--'' and all that follows and inserting ``other than an S
corporation.''
(14)(A) Section 465(a)(1)(B) is amended to read as follows:
``(B) a C corporation which is closely held,''.
(B) Section 465(a)(3) is amended to read as follows:
``(3) Closely held determination.--For purposes of
paragraph (1), a corporation is closely held if, at any time
during the last half of the taxable year, more than 50
percent in value of its outstanding stock is owned, directly
or indirectly, by or for not more than 5 individuals. For
purposes of this paragraph, an organization described in
section 401(a), 501(c)(17), or 509(a) or a portion of a trust
permanently set aside or to be used exclusively for the
purposes described in section 642(c) shall be considered an
individual.''
(C) Section 465(c)(7)(B) is amended by striking clause (i)
and by redesignating clauses (ii) and (iii) as clauses (i)
and (ii), respectively.
(D) Section 465(c)(7)(G) is amended to read as follows:
``(G) Loss of 1 member of affiliated group may not offset
income of personal service corporation.--Nothing in this
paragraph shall permit any loss of a member of an affiliated
group to be used as an offset against the income of any other
member of such group which is a personal service corporation
(as defined in section 269A(b) but determined by substituting
`5 percent' for `10 percent' in section 269A(b)(2)).''
(E) Section 465 is amended by adding at the end the
following new subsection:
``(f) Constructive Ownership Rules.--For purposes of
subsection (a)(3)--
``(1) Stock not owned by individual.--Stock owned, directly
or indirectly, by or for a corporation, partnership, estate,
or trust shall be considered as being owned proportionately
by its shareholders, partners, or beneficiaries.
``(2) Family ownership.--An individual shall be considered
as owning the stock owned, directly or indirectly, by or for
his family. For purposes of this paragraph, the family of an
individual includes only his brothers and sisters (whether by
the whole or half blood), spouse, ancestors, and lineal
descendants.
``(3) Options.--If any person has an option to acquire
stock, such stock shall be considered as owned by such
person. For purposes of this paragraph, an option to acquire
such an option, and each one of a series of such options,
shall be considered as an option to acquire such stock.
``(4) Application of family and option rules.--Paragraphs
(2) and (3) shall be applied if, but only if, the effect is
to make the corporation closely held under subsection (a)(3).
``(5) Constructive ownership as actual ownership.--Stock
constructively owned by a person by reason of the application
of paragraph (1) or (3), shall, for purposes of applying
paragraph (1) or (2), be treated as actually owned by such
person; but stock constructively owned by an individual by
reason of the application of paragraph (2) shall not be
treated as owned by him for purposes of again applying such
paragraph in order to make another the constructive owner of
such stock.
``(6) Option rule in lieu of family rule.--If stock may be
considered as owned by an individual under either paragraph
(2) or (3) it shall be considered as owned by him under
paragraph (3).
``(7) Convertible securities.--Outstanding securities
convertible into stock (whether or not convertible during the
taxable year) shall be considered as outstanding stock if the
effect of the inclusion of all such securities is to make the
corporation closely held under subsection (a)(3). The
requirement under the preceding sentence that all convertible
securities must be included if any are to be included shall
be subject to the exception that, where some of the
outstanding securities are convertible only after a later
date than in the case of others, the class having the earlier
conversion date may be included although the others are not
included, but no convertible securities shall be included
unless all outstanding securities having a prior conversion
date are also included.''
(15)(A) Section 553(a)(1) is amended by striking ``section
543(d)'' and inserting ``subsection (c)''.
(B) Section 553 is amended by adding at the end the
following new subsection:
``(c) Active Business Computer Software Royalties.--
``(1) In general.--For purposes of subsection (a), the term
`active business computer software royalties' means any
royalties--
``(A) received by any corporation during the taxable year
in connection with the licensing of computer software, and
``(B) with respect to which the requirements of paragraphs
(2), (3), and (4) are met.
``(2) Royalties must be received by corporation actively
engaged in computer software business.--The requirements of
this paragraph are met if the royalties described in
paragraph (1)--
``(A) are received by a corporation engaged in the active
conduct of the trade or business of developing,
manufacturing, or producing computer software, and
``(B) are attributable to computer software which--

[[Page S6561]]

``(i) is developed, manufactured, or produced by such
corporation (or its predecessor) in connection with the trade
or business described in subparagraph (A), or
``(ii) is directly related to such trade or business.
``(3) Royalties must constitute at least 50 percent of
income.--The requirements of this paragraph are met if the
royalties described in paragraph (1) constitute at least 50
percent of the ordinary gross income of the corporation for
the taxable year.
``(4) Deductions under sections 162 and 174 relating to
royalties must equal or exceed 25 percent of ordinary gross
income.--
``(A) In general.--The requirements of this paragraph are
met if--
``(i) the sum of the deductions allowable to the
corporation under sections 162, 174, and 195 for the taxable
year which are properly allocable to the trade or business
described in paragraph (2) equals or exceeds 25 percent of
the ordinary gross income of such corporation for such
taxable year, or
``(ii) the average of such deductions for the 5-taxable
year period ending with such taxable year equals or exceeds
25 percent of the average ordinary gross income of such
corporation for such period.
If a corporation has not been in existence during the 5-
taxable year period described in clause (ii), then the period
of existence of such corporation shall be substituted for
such 5-taxable year period.
``(B) Deductions allowable under section 162.--For purposes
of subparagraph (A), a deduction shall not be treated as
allowable under section 162 if it is specifically allowable
under another section.
``(C) Limitation on allowable deductions.--For purposes of
subparagraph (A), no deduction shall be taken into account
with respect to compensation for personal services rendered
by the 5 individual shareholders holding the largest
percentage (by value) of the outstanding stock of the
corporation. For purposes of the preceding sentence
individuals holding less than 5 percent (by value) of the
stock of such corporation shall not be taken into account.''
(16) Section 556(b)(1) is amended by striking ``, but not
including'' and all that follows and inserting a period.
(17) Section 561(a) is amended by striking paragraph (3),
by inserting ``and'' at the end of paragraph (1), and by
striking ``, and'' at the end of paragraph (2) and inserting
a period.
(18) Section 562(b) is amended to read as follows:
``(b) Distributions in Liquidation.--Except in the case of
a foreign personal holding company described in section 552--
``(1) in the case of amounts distributed in liquidation,
the part of such distribution which is properly chargeable to
earnings and profits accumulated after February 28, 1913,
shall be treated as a dividend for purposes of computing the
dividends paid deduction, and
``(2) in the case of a complete liquidation occurring
within 24 months after the adoption of a plan of liquidation,
any distribution within such period pursuant to such plan
shall, to the extent of the earnings and profits (computed
without regard to capital losses) of the corporation for the
taxable year in which such distribution is made, be treated
as a dividend for purposes of computing the dividends paid
deduction.

For purposes of paragraph (1), a liquidation includes a
redemption of stock to which section 302 applies. Except to
the extent provided in regulations, the preceding sentence
shall not apply in the case of any mere holding or investment
company which is not a regulated investment company.''
(19) Section 563 is amended by striking subsections (a) and
(b), by redesignating subsections (c) and (d) as subsections
(a) and (b), and by striking ``, (b), or (c)'' in subsection
(b) (as so redesignated).
(20) Section 564 is hereby repealed.
(21) Section 631(c) is amended by striking the next to the
last sentence and inserting the following: ``This subsection
shall have no application for purposes of applying subchapter
G (relating to corporations used to avoid income tax on
shareholders).''.
(22) Section 852(b)(1) is amended by striking ``which is a
personal holding company (as defined in section 542) or''.
(23)(A) Section 856(h)(1) is amended to read as follows:
``(1) In general.--For purposes of subsection (a)(6), a
corporation, trust, or association is closely held if the
stock ownership requirement of section 465(a)(3) is met.''.
(B) Section 856(h)(3)(A)(i) is amended by striking
``section 542(a)(2)'' and inserting ``section 465(a)(3)''.
(C) Paragraph (3) of section 856(h) is amended by striking
subparagraph (B) and by redesignating subparagraphs (C) and
(D) as subparagraphs (B) and (C), respectively.
(D) Subparagraph (C) of section 856(h)(3), as redesignated
by the preceding subparagraph, is amended by striking
``subparagraph (C)'' and inserting ``subparagraph (B)''.
(24) The last sentence of section 882(c)(2) is amended to
read as follows:

``The preceding sentence shall not be construed to deny the
credit provided by section 33 for tax withheld at source or
the credit provided by section 34 for certain uses of
gasoline.''.
(25) Section 936(a)(3) is amended by striking subparagraphs
(B) and (C), by inserting ``or'' at the end of subparagraph
(A), and by redesignating subparagraph (D) as subparagraph
(B).
(26) Section 936 is amended by striking subsection (g).
(27) Section 992(d) is amended by striking paragraph (2)
and by redesignating paragraphs (3), (4), (5), (6), and (7)
as paragraphs (2), (3), (4), (5), and (6), respectively.
(28) Section 992 is amended by striking subsection (e).
(29) Section 1202(e)(8) is amended by striking ``section
543(d)(1)'' and inserting ``section 553(c)(1)''.
(30) Section 1298(b) is amended by striking paragraph (8)
and redesignating paragraph (9) as paragraph (8).
(31) Section 1504(c)(2)(B) is amended by adding ``and'' at
the end of clause (i), by striking clause (ii), and by
redesignating clause (iii) as clause (ii).
(32)(A) Section 1551(a) is amended by striking ``or the
accumulated earnings credit'' and all that follows and
inserting ``unless such transferee corporation shall
establish by the clear preponderance of the evidence that the
securing of such benefits was not a major purpose of such
transfer.''.
(B) The section heading for section 1551 is amended by
striking ``AND ACCUMULATED EARNINGS CREDIT''.
(C) The item relating to section 1551 in the table of
sections for part I of subchapter B of chapter 6 is amended
by striking ``and accumulated earnings credit''.
(33)(A) Section 1561(a) is amended--
(i) by striking paragraph (2),
(ii) by redesignating paragraphs (3) and (4) as paragraphs
(2) and (3),
(iii) by striking ``paragraph (3)'' each place it appears
and inserting ``paragraph (2)'',
(iv) by striking ``paragraph (4)'' and inserting
``paragraph (3)'', and
(v) by striking the third sentence.
(B) Section 1561(b) is amended to read as follows:
``(b) Certain Short Taxable Years.--If a corporation has a
short taxable year which does not include a December 31 and
is a component member of a controlled group of corporations
with respect to such taxable year, then for purposes of this
subtitle, the amount in each taxable income bracket in the
tax table in section 11(b) for such corporation for such
taxable year shall be the amount specified in subsection
(a)(1), divided by the number of corporations which are
component members of such group on the last day of such
taxable year. For purposes of the preceding sentence, section
1563(b) shall be applied as if such last day were substituted
for December 31.''.
(34) Section 2057(e)(2)(C) is amended by adding at the end
the following new sentence: ``References to sections 542 and
543 in the preceding sentence shall be treated as references
to such sections as in effect on the day before their
repeal.''
(35) Sections 6422 is amended by striking paragraph (3) and
by redesignating paragraphs (4) through (12) and paragraphs
(3) through (11), respectively.
(36) Section 6501 is amended by striking subsection (f).
(37) Section 6503(k) of such Code is amended by striking
paragraph (1) and by redesignating paragraphs (2) through (5)
as paragraphs (1) through (4), respectively.
(38) Section 6515 is amended by striking paragraph (1) and
by redesignating paragraphs (2) through (6) as paragraphs (1)
through (5), respectively.
(39) Section 6601(b) is amended by striking paragraph (4)
and redesignating paragraph (5) as paragraph (4).
(40) Subsections (d)(1)(B) and (e)(2) of section 6662 of
such Code are each amended by striking ``or a personal
holding company (as defined in section 542)''.
(41) Section 6683 is hereby repealed.
(42) Section 7518(c)(1) is amended by inserting ``and'' at
the end of subparagraph (C), by striking ``, and'' at the end
of subparagraph (D) and inserting a period, and by striking
subparagraph (E).
(c) Clerical Amendments.--
(1) The table of parts for subchapter G of chapter 1 of
such Code is amended by striking the items relating to parts
I and II.
(2) The table of sections for part IV of such subchapter G
is amended by striking the item relating to section 564.
(3) The table of sections for part I of subchapter B of
chapter 68 of such Code is amended by striking the item
relating to section 6683.

SEC. 207. EFFECTIVE DATES.

(a) In General.--Except as otherwise provided in this
title, the amendments made by this title shall apply to
distributions received after December 31, 2002, and before
January 1, 2007.
(b) Special Rules.--
(1) Section 1374 tax.--In applying the amendments made by
this section, any tax imposed by section 1374 of the Internal
Revenue Code of 1986 for any taxable year beginning before
January 1, 2003, shall not be taken into account.
(2) Section 205 (c) and (d) and section 206.--The
amendments made by subsections (c) and (d) of section 205 and
by section 206 shall apply to taxable years beginning after
December 31, 2003, and before January 1, 2007; except that--
(A) section 547 of such Code (as in effect before its
repeal) shall continue to apply to deficiency dividends (as
defined in section 547(d) of such Code) relating to taxable
years beginning before January 1, 2004, and
(B) subsections (a) and (b) of section 563 of such Code (as
so in effect) shall continue to apply to dividends relating
to taxable years beginning before January 1, 2004.

[[Page S6562]]

Notwithstanding subparagraphs (A) and (B), such dividends
shall not be taken into account in applying section 116 of
such Code or part X of subchapter B of chapter 1 of such
Code.
(3) Section 282.--Section 282 of such Code (as added by
this title) shall apply to taxable years ending after the
date of the enactment of this Act.
______

SA 671. Mr. LAUTENBERG (for himself, Mr. Corzine, Mr. Leahy, Mrs.
Murray, and Mr. Reid) submitted an amendment intended to be proposed by
him to the bill H.R. 1298, to provide assistance to foreign countries
to combat HIV/AIDS, tuberculosis, and malaria, and for other purposes;
which was ordered to lie on the table; as follows:

At the appropriate place, insert the following:

SEC. ____. RULE OF CONSTRUCTION RELATING TO METHOD OF
PREVENTION.

Nothing in this Act (or an amendment made by this Act)
shall be construed to require that an organization utilize or
endorse any particular approach to HIV/AIDS prevention,
except that any information provided by the organization
about any particular preventive approach shall be complete
and medically accurate including both the public health
benefits and failure rates of the approach involved.
______

SA 672. Mr. REED (for himself, Mr. Corzine, Ms. Mikulski, Mr. Kerry,
Mr. Rockefeller, Ms. Landrieu, and Mr. Sarbanes) 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. ____. LOW-INCOME HOUSING TAX CREDIT.

(a) Findings.--The Senate finds the following:
(1) The low-income housing tax credit is the Nation's
primary program for producing affordable rental housing.
(2) Each year, the low-income housing tax credit produces
over 115,000 affordable apartments.
(3) Since Congress created the low-income housing tax
credit in 1986, the credit has created 1,500,000 units of
affordable housing for about 3,500,000 Americans.
(4) Analyses have found that certain approaches to reducing
or eliminating the taxation of dividends have the potential
to reduce the value of the low-income housing tax credit and
so reduce the amount of affordable housing available.
(5) As of 2001, over 7,000,000 American renter families (1
in 5) suffer severe housing affordability problems, meaning
that the family spends more than half of its income on rent
or lives in substandard housing.
(6) More than 150,000 apartments in the low-cost rental
housing inventory are lost each year due to rent increases,
abandonment, and deterioration.
(b) Sense of the Senate.--It is the sense of the Senate
that any reduction or elimination of the taxation on
dividends should include provisions to preserve the success
of the low-income housing tax credit.
______

SA 673. Mr. DeWine 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. TREATMENT OF CERTAIN IMPORTED RECYCLED HALONS.

(a) In General.--Section 1803(c) of the Small Business Job
Protection Act of 1986 (Public Law 104-188) is amended by
striking ``1997'' and ``1998'' and inserting ``1994''.
(b) Waiver of Limitations.--If refund or credit of any
overpayment of tax resulting from the amendment 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.
______

SA 674. Mr. FEINGOLD submitted an amendment intended to be proposed
by him to the bill H.R. 1298, to provide assistance to foreign
countries to combat HIV AIDS, tuberculosis, and malaria, and for other
purposes; which was ordered to lie on the table; as follows:

On page 31, between lines 5 and 6, insert the following:

``(V) Ensuring that United States efforts to combat HIV/
AIDS take maximum advantage of the potential for positive
spill-over effects in other health priorities, such as
improving pre-natal care and combating tuberculosis through
referral at voluntary counseling and testing centers.

______

SA 675. Mr. KENNEDY (for himself, Mr. McCain, Mr. Feingold, Mrs.
Feinstein, Mr. Levin, Mr. Schumer, Mr. Pryor, Mr. Johnson, and Mr.
Leahy) submitted an amendment intended to be proposed by him to the
bill H.R. 1298, to provide assistance to foreign countries to combat
HIV AIDS, tuberculosis, and malaria, and for other purposes; which was
ordered to lie on the table; as follows:

On page 54, strike lines 7 through 24, and insert the
following: ``medicines to treat opportunistic infections, at
the lowest possible price for products of assured quality (as
provided for in subparagraph (D)). Such procurement shall be
made anywhere in the world notwithstanding any provision of
law restricting procurement of goods to domestic sources.
``(B) Mechanisms for quality control and sustainable
supply.--Mechanisms to ensure that such HIV/AIDS
pharmaceuticals, antiviral therapies, and other appropriate
medicines are quality-controlled and sustainably supplied.
``(C) Distribution.--The distribution of such HIV/AIDS
pharmaceuticals, antiviral therapies, and other appropriate
medicines (including medicines to treat opportunistic
infections) to qualified national, regional, or local
organizations for the treatment of individuals with HIV/AIDS
in accordance with appropriate HIV/AIDS testing and
monitoring requirements and treatment protocols and for the
prevention of mother-to-child transmission of the HIV
infection.
``(D) Lowest possible price and assured quality.--
``(i) Lowest possible price.--With respect to an HIV/AIDS
pharmaceutical, an antiviral therapy, or any other
appropriate medicine, including a medicine to treat
opportunistic infections, the lowest possible price means the
lowest delivered duty unpaid price at which such medicine
(which includes all products of assured quality with the same
active ingredients) may be obtained in sufficient quantity in
either the United States or elsewhere on the world market.
``(ii) Assured quality.--An HIV/AIDS pharmaceutical, an
antiviral therapy, or any other appropriate medicine,
including a medicine to treat opportunistic infections, shall
be considered a product of assured quality if it is--

``(I)(aa) approved by the Food and Drug Administration;
``(bb) authorized for marketing by the European Commission;
``(cc) on the most recent edition of the list of HIV-
related medicines prequalified for procurement by the World
Health Organization's Pilot Procurement Quality and Sourcing
Project; or
``(dd) during the period that begins on the date of
enactment of this section and ending on December 31, 2004,
authorized for use by the national regulatory authority of
the country where the product will be used; and
``(II) in compliance with--

``(aa) the intellectual property laws of the country where
the product is manufactured;
``(bb) the intellectual property laws of the country where
the product will be used; and
``(cc) applicable international obligations in the field of
intellectual property, to the extent consistent with the
flexibilities provided in the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS), as
interpreted in the Declaration on the TRIPS Agreement and
Public Health, adopted by the World Trade Organization at the
Fourth Ministerial Conference at Doha, Qatar on November 14,
2001.
``(iii) Prices publicly available.--Prices paid for
purchases of HIV/AIDS pharmaceuticals, antiviral therapies,
and other appropriate medicines, including medicines to treat
opportunistic infections, of assured quality shall be made
publicly available.
``(iv) Application to appropriated funds.--Funds
appropriated under title IV of the United States Leadership
Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 that
are used for the procurement of HIV/AIDS pharmaceuticals,
antiviral therapies, and other appropriate medicines,
including medicines to treat opportunistic infections, shall
be used to procure products of assured quality at the lowest
possible price, as determined under this subparagraph.
(E) Rule of construction.--Nothing in this paragraph shall
be construed to affect a decision regarding which medicine is
most medically appropriate for a specific disease or
condition.
______

SA 676. Mr. DURBIN proposed an amendment intended to the bill H.R.
1298, to provide assistance to foreign countries to combat HIV AIDS,
tuberculosis, and malaria, and for other purposes; as follows:

Beginning on page 35, strike line 22, and all that follows
through page 45, line 25, and insert the following section:

SEC. 202. PARTICIPATION IN THE GLOBAL FUND TO FIGHT AIDS,
TUBERCULOSIS AND MALARIA.

(a) Authority for United States Participation.--
(1) United states participation.--The United States is
authorized to participate in the Global Fund.
(2) Privileges and immunities.--The Global Fund shall be
considered a public international organization for purposes
of section 1 of the International Organizations Immunities
Act (22 U.S.C. 288).
(b) Public Dissemination.--Not later than 180 days after
the date of the enactment of this Act, and regularly
thereafter for the duration of the Global Fund, the
Coordinator of the United States Government Activities to

[[Page S6563]]

Combat HIV/AIDS Globally shall make available to the public,
through electronic media and other publication mechanisms,
the following documents:
(1) Any proposal approved for funding by the Global Fund.
(2) A list of all organizations that comprise each country
coordinating mechanism, as such mechanism is recognized by
the Global Fund.
(3) A list of all organizations that received funds from
the Global Fund, including the amount of such funds received
by each organization.
(c) Annual Report.--Not later than one year after the date
of the enactment of this Act, and annually thereafter, the
Coordinator of the United States Government Activities to
Combat HIV/AIDS Globally shall submit to the appropriate
congressional committees a report on the Global Fund. The
report shall include, for the reporting period, the following
elements:
(1) Contributions pledged to or received by the Global Fund
(including donations from the private sector).
(2) Efforts made by the Global Fund to increase
contributions from all sources other than the United States.
(3) Programs funded by the Global Fund.
(4) An evaluation of the effectiveness of such programs.
(5) Recommendations regarding the adequacy of such
programs.
(d) United States Financial Participation.--
(1) Authorization of appropriations.--Of the amounts
authorized to be appropriated under section 401, there are
authorized to be appropriated for United States contributions
to the Global Fund, in addition to any other amounts
authorized to be appropriated under any other provision of
law for such purpose, $1,000,000,000 for fiscal year 2004,
$1,200,000,000 for fiscal year 2005, and such sums as may be
necessary for fiscal years 2006 through 2008.
(2) Availability of funds.--
(A) Certain fiscal year 2004 funds.--Of the amount
authorized to be appropriated by paragraph (1) for fiscal
year 2004, the amount in excess of $500,000,000 shall be
available only if the Global Fund receives, during the period
beginning on April 1, 2003, and ending on March 31, 2004,
pledges from all donors other than the United States for
funding new grant proposals in an amount not less than
$2,000,000,000.
(B) Certain fiscal year 2005 funds.--Of the amount
authorized to be appropriated by paragraph (1) for fiscal
year 2005, the amount in excess of $600,000,000 shall be
available only if the Global Fund receives, during the period
beginning on April 1, 2004, and ending on March 31, 2005,
pledges from all donors other than the United States for
funding new grant proposals in an amount not less than
$2,400,000,000.
(C) Receipt of pledges before period end.--If the Global
Fund receives in a period described in subparagraph (A) or
(B) the pledges described in such subparagraph in the amount
required by such subparagraph as of a date before the end of
such period, the United States contribution specified in such
subparagraph shall be available as of such date.
(D) Availability of amounts.--Amounts authorized to be
appropriated by paragraph (1), and available under that
paragraph or this paragraph, shall remain available until
expended.
(3) Prior fiscal year funds.--Any unobligated balances of
funds made available for fiscal years 2001 and 2002 under
section 141 of the Global AIDS and Tuberculosis Relief Act of
2000 (22 U.S.C. 6841)--
(A) are authorized to remain available until expended; and
(B) shall be merged with, and made available for the same
purposes as, the funds authorized to be appropriated by
paragraph (1).
______

SA 677. Mr. LEAHY (for himself and Mrs. Clinton) submitted an
amendment intended to be proposed by him to the bill H.R. 1298, to
provide assistance to foreign countries to combat HIV AIDS,
tuberculosis, and malaria, and for other purposes; which was ordered to
lie on the table; as follows:

At the appropriate place insert:

SEC.   . POLICY TO INCREASE FUNDING TO COMBAT HIV/AIDS AND
FOR OTHER INTERNATIONAL HEALTH PROGRAMS.

(a) Findings.--(1) The National Security Strategy of the
United States, dated September 17, 2002, states that ``[t]he
scale of the public health crisis in poor countries is
enormous. In countries afflicted by epidemics and pandemics .
. . growth and development will be threatened until these
scourges can be contained.''
(2) The United States Agency for International Development
concluded that ``Global health issues have global
consequences that not only affect the people of developing
nations but also directly affect the interests of American
citizens.''
(3) The Centers for Disease Control and Prevention
concluded that ``[i]n today's global environment, new
diseases have the potential to spread across the world in a
matter of days, or even hours, making early detection and
action more important than ever.''
(4) The President's Fiscal Year 2004 budget request for the
Child Survival and Health Programs Fund, which is the
principle source of funds for building public health capacity
in developing countries, would cut the Fund by $124,313,000
(not including programs to combat HIV/AIDS which are cut by
an additional $86,030,000) below the Fiscal Year 2003 enacted
level.
(5) Within the Child Survival and Health Programs Fund, the
President's Fiscal Year 2004 budget request would cut funding
to protect vulnerable children by 63%; to combat infectious
diseases (other than HIV/AIDS) by 32%; to improve child
nutrition and maternal health by 12%; and to support family
planning and reproductive health by 5%.
(6) These programs save the lives of millions of women and
children each year, help prevent dangerous infectious
diseases from spreading to the United States, build goodwill
towards the United States, and alleviate conditions that can
contribute to international terrorism.
(7) Building public health capacity in developing countries
by improving children's health, material and reproductive
health, and combating other infectious diseases is an
essential component of an effective global strategy to
control the spread of HIV/AIDS.
(b) Policy.--For each of the Fiscal Years 2004 through
2008, the President should request and the Congress should
appropriate $3,000,000,000 to carry out this Act and an
amount that exceeds the amount appropriated in the previous
fiscal year for the Child Survival and Health Programs Fund,
including for programs to protect vulnerable children, to
combat other infectious diseases, to improve disease
surveillance and combat drug resistance, to improve child
nutrition and maternal health, and to support family planning
and reproductive health.
______

SA 678. Mr. DORGAN (for himself, Mr. Leahy, Mr. Daschle, Mr. Nelson
of Florida, and Mr. Harkin) proposed an amendment to the bill H.R.
1298, to provide assistance to foreign countries to combat HIV AIDS,
tuberculosis, and malaria, and for other purposes; as follows:

At the appropriate place insert the following:

SEC. ____. EMERGENCY FOOD AID FOR HIV/AIDS VICTIMS.

(a) Findings.--The Senate finds the following:
(1) Whereas the Centers for Disease Control and Prevention
found that ``For persons living with HIV/AIDS, practicing
sound nutrition can play a key role in preventing
malnutrition and wasting syndrome, which can weaken an
already compromised immune system.''.
(2) Whereas there are immediate needs for additional food
aid in sub-Saharan Africa where the World Food Program has
estimated that more than 40,000,000 people are at risk of
starvation.
(3) Whereas prices of certain staple commodities have
increased by 30 percent over the past year, which was not
anticipated by the President's fiscal year 2004 budget
request.
(4) The Commodity Credit Corporation has the legal
authority to finance up to $30,000,000,000 for ongoing
agriculture programs and $250,000,000 represents a use of
less than 1 percent of such authority to combat the worst
public health crisis in 500 years.
(b) Commodity Credit Corporation.--
(1) In general.--The Secretary of Agriculture shall
immediately use the funds, facilities, and authorities of the
Commodity Credit Corporation to provide an additional
$250,000,000 in fiscal year 2003 to carry out programs
authorized under title II of the Agricultural Trade
Development and Assistance Act of 1954 (7 U.S.C. 1691 et
seq.) to assist in mitigating the effects of HIV/AIDS on
affected populations in sub-Saharan Africa and other
developing nations, and by September 30, 2003, the
Administrator of the United States Agency for International
Development shall enter into agreements with private
voluntary organizations, non-governmental organizations, and
other appropriate organizations for the provision of such
agricultural commodities through programs that--
(A) provide nutritional assistance to individuals with HIV/
AIDS and to children, households, and communities affected by
HIV/AIDS; and
(B) generate funds from the sale of such commodities for
activities related to the prevention and treatment of HIV/
AIDS, support services and care for HIV/AIDS infected
individuals and affected households, and the creation of
sustainable livelihoods among individuals in HIV/AIDS
affected communities, including income-generating and
business activities.
(2) Requirement.--The food aid provided under this
subsection shall be in addition to any other food aid
acquired and provided by the Commodity Credit Corporation
prior to the date of enactment of this Act. Agricultural
commodities made available under this subsection may,
notwithstanding any other provision of law, be shipped in
fiscal years 2003 and 2004.
______

SA 679. Mr. LAUTENBERG (for himself, Mr. Reid, Mr. Corzine, Mr.
Leahy, Mrs. Murray, and Mrs. Boxer) submitted an amendment intended to
be proposed by him to the bill H.R. 1298, to provide assistance to
foreign countries to combat HIV AIDS, tuberculosis, and malaria, and
for other purposes; which was ordered to lie on the table; as follows:

[[Page S6564]]

At the appropriate place, insert the following:

SEC. ____. RULE OF CONSTRUCTION RELATING TO METHOD OF
PREVENTION.

Nothing in this Act (or an amendment made by this Act)
shall be construed to require that an organization utilize or
endorse any particular approach to HIV/AIDS prevention,
except that any information provided by the organization
about any particular preventive approach shall be complete
and medically accurate including both the public health
benefits and failure rates of the approach involved.
______

SA 680. 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:

On page 8, beginning with line 13, strike all through the
matter following line 2 on page 9, and insert:
``(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......................................................$60,500
In 2004......................................................$60,500
In 2005......................................................$60,500
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......................................................$41,500
In 2004......................................................$41,500
In 2005......................................................$41,500
After 2005................................................$33,750.''.

Beginning on page 82, line 25, strike all through page 83,
line 13, and insert:
(2) Exception for existing fasits.--The amendments made by
this section 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 of such interests.
On page 165, beginning with line 21, strike all through
page 166, line 8, and insert:
(a) General Rule.--If--
(1) a taxpayer eligible to participate in--
(A) the Department of the Treasury's Offshore Voluntary
Compliance Initiative, or
(B) the Department of the Treasury's voluntary disclosure
initiative which applies to the taxpayer by reason of the
taxpayer's underreporting of United States income tax
liability through financial arrangements which rely on the
use of offshore arrangements which were the subject of the
initiative described in subparagraph (A), and
(2) any interest or applicable penalty is imposed with
respect to any arrangement to which any initiative described
in paragraph (1) applied or to any underpayment of Federal
income tax attributable to items arising in connection with
any arrangement described in paragraph (1),

then, notwithstanding any other provision of law, the amount
of such interest or penalty shall be equal to twice that
determined without regard to this section.
On page 206, between lines 19 and 20, insert:

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

(a) In General.--Section 1(g)(2)(A) (relating to child to
whom subsection applies) is amended by striking ``age 14''
and inserting ``age 18''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years beginning after December 31,
2003.

SEC. ____. CONSISTENT AMORTIZATION OF PERIODS FOR
INTANGIBLES.

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

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

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

SEC. ____. CLASS LIVES FOR UTILITY GRADING COSTS.

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

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

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

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

(a) In General.--Section 332 is amended by adding at the
end the following new subsection:
``(d) Recognition of Gain on Liquidation of Certain Holding
Companies.--
``(1) In general.--Subsection (a) and section 331 shall not
apply to any distribution in complete liquidation of an
applicable holding company to the extent of the earnings and
profits of such company.
``(2) Applicable holding company.--For purposes of this
subsection--
``(A) In general.--The term `applicable holding company'
means any corporation--
``(i) which is a member of a chain of includible
corporations with a common parent which is a foreign
corporation,
``(ii) the stock of which is directly owned by such common
parent or another foreign corporation,
``(iii) substantially all of the assets of which consist of
stock in other members of such chain of corporations, and

[[Page S6565]]

``(iv) which has not been in existence at least 5 years as
of the date of the liquidation.
``(B) Includible corporation.--The term `includible
corporation' has the meaning given such term under section
1504(b) (without regard to paragraph (3) thereof).''
(b) Effective Date.--The amendment made by this section
shall apply to distributions in complete liquidation
occurring after the date of the enactment of this Act.

SEC. ____. LEASE TERM TO INCLUDE CERTAIN SERVICE CONTRACTS.

(a) In General.--Section 168(i)(3) (relating to lease term)
is amended by adding at the end the following new
subparagraph:
``(C) Special rule for service contracts.--In determining a
lease term, there shall be taken into account any optional
service contract or other similar arrangement.''
(b) Effective Date.--The amendment made by this section
shall apply to leases entered into after the date of the
enactment of this Act.

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

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

SEC. ____. REPEAL OF CAPITAL GAINS TREATMENT FOR CERTAIN
TRANSACTIONS INVOLVING OPTIONS AND COMMODITIES
DEALERS.

(a) In General.--Subsection (a) of section 1256 (relating
to section 1256 contracts marked to market) is amended--
(1) by striking paragraph (3),
(2) by redesignating paragraph (4) as paragraph (3), and
(3) by inserting ``and'' at the end of paragraph (2).
(b) Conforming Amendments.--
(1) Section 988(c)(1)(E)(iv) is amended to read as follows:
``(iv) Treatment of certain currency contracts.--Except as
provided in regulations, in the case of a qualified fund, any
bank forward contract, any foreign currency futures contract
traded on a foreign exchange, or to the extent provided in
regulations any similar instrument, which is not otherwise a
section 1256 contract shall be treated as a section 1256
contract for purposes of section 1256.''.
(2) Section 1092(b)(2)(A)(ii) is amended by striking ``and
section 1256(a)(3) will only apply to net gain or net loss
attributable to section 1256 contracts,''.
(3) Section 1092(d)(5)(B) is amended by striking
``1256(a)(4)'' and inserting ``1256(a)(3)''.
(4) Section 1256(c)(1) is amended by striking ``paragraphs
(1), (2), and (3)'' and inserting ``paragraphs (1) and (2)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2003.
Beginning on page 260, line 7, strike all through page 264,
line 6, and insert:

SEC. 521. CIVIL RIGHTS TAX RELIEF.

(a) Deduction Allowed Whether or Not Taxpayer Itemizes
Other Deductions.--Subsection (a) of section 62 (defining
adjusted gross income) is amended by inserting after
paragraph (18) the following new item:
``(19) Costs involving discrimination suits, etc.--Any
deduction allowable under this chapter for attorney fees and
court costs paid by, or on behalf of, the taxpayer in
connection with any action involving a claim of unlawful
discrimination (as defined in subsection (e)) or a claim of a
violation of subchapter III of chapter 37 of title 31, United
States Code. The preceding sentence shall not apply to any
deduction in excess of the amount includible in the
taxpayer's gross income for the taxable year on account of a
judgment or settlement (whether by suit or agreement and
whether as lump sum or periodic payments) resulting from such
claim.''.
(b) Unlawful Discrimination Defined.--Section 62 is amended
by adding at the end the following new subsection:
``(e) Unlawful discrimination defined.--For purposes of
subsection (a)(19), the term `unlawful discrimination' means
an act that is unlawful under any of the following:
``(1) Section 302 of the Civil Rights Act of 1991 (2 U.S.C.
1202).
``(2) Section 201, 202, 203, 204, 205, 206, or 207 of the
Congressional Accountability Act of 1995 (2 U.S.C. 1311,
1312, 1313, 1314, 1315, 1316, or 1317).
``(3) The National Labor Relations Act (29 U.S.C. 151 et
seq.).
``(4) The Fair Labor Standards Act of 1938 (29 U.S.C. 201
et seq.).
``(5) Section 4 or 15 of the Age Discrimination in
Employment Act of 1967 (29 U.S.C. 623 or 633a).
``(6) Section 501 or 504 of the Rehabilitation Act of 1973
(29 U.S.C. 791 or 794).
``(7) Section 510 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1140).
``(8) Title IX of the Education Amendments of 1972 (29
U.S.C. 1681 et seq.).
``(9) The Employee Polygraph Protection Act of 1988 (29
U.S.C. 201 et seq.).
``(10) The Worker Adjustment and Retraining Notification
Act (29 U.S.C. 2102 et seq.).
``(11) Section 105 of the Family and Medical Leave Act of
1993 (29 U.S.C. 2615).
``(12) Chapter 43 of title 38, United States Code (relating
to employment and reemployment rights of members of the
uniformed services).
``(13) Section 1977, 1979, or 1980 of the Revised Statutes
(42 U.S.C. 1981, 1983, or 1985).
``(14) Section 703, 704, or 717 of the Civil Rights Act of
1964 (42 U.S.C. 2000e-2, 2000e-3, or 2000e-16).
``(15) Section 804, 805, 806, 808, or 818 of the Fair
Housing Act (42 U.S.C. 3604, 3605, 3606, 3608, or 3617).
``(16) Section 102, 202, 302, or 503 of the Americans with
Disabilities Act of 1990 (42 U.S.C. 12112, 12132, 12182, or
12203).
``(17) Any provision of Federal law (popularly known as
whistleblower protection provisions) prohibiting the
discharge of an employee, the discrimination against an
employee, or any other form of retaliation or reprisal
against an employee for asserting rights or taking other
actions permitted under Federal law.
``(18) Any provision of State or local law, or common law
claims permitted under Federal, State, or local law--
``(i) providing for the enforcement of civil rights, or
``(ii) regulating any aspect of the employment
relationship, including prohibiting the discharge of an
employee, the discrimination against an employee, or any
other form of retaliation or reprisal against an employee for
asserting rights or taking other actions permitted by law.''.
(c) Effective Date.--The amendments made by this section
shall apply to fees and costs paid after the date of the
enactment of this Act with respect to any judgment or
settlement occurring after such date.
______

SA 681. Mr. KENNEDY (for himself, Mr. McCain, Mr Feingold, Mrs.
Feinstein, Mr. Levin, Mr. Schumer, Mr. Pryor, and Mr. Johnson) proposed
an amendment to the bill H. 1298, to provide foreign assistance to
foreign countries to combat HIV AIDS, tuberculosis, and malaria, and
for other purposes; as follows:

On page 54, strike lines 7 through 24, and insert the
following: ``medicines to treat opportunistic infections, at
the lowest possible price for products of assured quality (as
provided for in subparagraph (D)). Such procurement shall be
made anywhere in the world notwithstanding any provision of
law restricting procurement of goods to domestic sources.
``(B) Mechanisms for quality control and sustainable
supply.--Mechanisms to ensure that such HIV/AIDS
pharmaceuticals, antiviral therapies, and other appropriate
medicines are quality-controlled and sustainably supplied.
``(C) Distribution.--The distribution of such HIV/AIDS
pharmaceuticals, antiviral therapies, and other appropriate
medicines (including medicines to treat opportunistic
infections) to qualified national, regional, or local
organizations for the treatment of individuals with HIV/AIDS
in accordance with appropriate HIV/AIDS testing and
monitoring requirements and treatment protocols and for the
prevention of mother-to-child transmission of the HIV
infection.
``(D) Lowest possible price and assured quality.--
``(i) Lowest possible price.--With respect to an HIV/AIDS
pharmaceutical, an antiviral therapy, or any other
appropriate medicine, including a medicine to treat
opportunistic infections, the lowest possible price means the
lowest delivered duty unpaid price at which such medicine
(which includes all products of assured quality with the same
active ingredients) may be obtained in sufficient quantity in
either the United States or elsewhere on the world market.
``(ii) Assured quality.--An HIV/AIDS pharmaceutical, an
antiviral therapy, or any other appropriate medicine,
including a medicine to treat opportunistic infections, shall
be considered a product of assured quality if it is--

``(I)(aa) approved by the Food and Drug Administration;
``(bb) authorized for marketing by the European Commission;
``(cc) on the most recent edition of the list of HIV-
related medicines prequalified for procurement by the World
Health Organization's Pilot Procurement Quality and Sourcing
Project; or
``(dd) during the period that begins on the date of
enactment of this section and ending on December 31, 2004,
authorized for use by the national regulatory authority of
the country where the product will be used; unless the
President determines that the product does not meet
appropriate quality standards and
``(II) in compliance with--

``(aa) the intellectual property laws of the country where
the product is manufactured;
``(bb) the intellectual property laws of the country where
the product will be used; and
``(cc) applicable international obligations in the field of
intellectual property, to the extent consistent with the
flexibilities provided in the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS), as
interpreted in the Declaration on the TRIPS Agreement and
Public Health, adopted by the World Trade Organization at the
Fourth Ministerial Conference at Doha, Qatar on November 14,
2001.

[[Page S6566]]

``(iii) Prices publicly available.--Prices paid for
purchases of HIV/AIDS pharmaceuticals, antiviral therapies,
and other appropriate medicines, including medicines to treat
opportunistic infections, of assured quality shall be made
publicly available.
``(iv) Application to appropriated funds.--Funds
appropriated under title IV of the United States Leadership
Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 that
are used for the procurement of HIV/AIDS pharmaceuticals,
antiviral therapies, and other appropriate medicines,
including medicines to treat opportunistic infections, shall
be used to procure products of assured quality at the lowest
possible price, as determined under this subparagraph.
``(E) Rule of Construction.--Nothing in this paragraph
shall be construed to affect a decision regarding which
medicine is most medically appropriate for a specific disease
or condition.
______

SA 682. Mrs. Feinstein (for herself, Mr. Leahy, Mr. Durbin, Mrs.
Clinton, Mr. Jeffords, Mr. Harkin, Mr. Lautenberg, Mr. Reid, Mr.
Schumer, Mr. Corzine, Mrs. Boxer, Mr. Feingold, and Mr. Biden) proposed
an amendment to the bill H. 1298, to provide assistance to foreign
countries to combat HIV AIDS, tuberculosis, and malaria, and for other
purposes; as follows:

Beginning on page 94, strike line 19 and all that follows
through line 17 on page 95, and insert the following: ``301
of this Act), including promoting abstinence from sexual
activity and encouraging monogamy and faithfulness and
promoting the effective use of condoms for sexually active
people; and
``(4) 10 percent of such amounts for orphans and vulnerable
children.

``SEC. 403. ALLOCATION OF FUNDS.

``(a) Therapeutic Medical Care.--For fiscal years 2006
through 2008, not less than 55 percent of the amounts
appropriated pursuant to the authorization of appropriations
under section 401 for HIV/AIDS assistance for each such
fiscal year shall be expended for therapeutic medical care of
individuals infected with HIV, of which such amount at least
75 percent should be expended for the purchase and
distribution of antiretroviral pharmaceuticals and at least
25 percent should be expended for related care.''.
______

SA 683. Mr. Frist (for Mr. Dodd) proposed an amendment to the bill S.
535, to provide Capitol-flown flags to the families of law enforcement
officers and firefighters killed in the line of duty; as follows:

On page 1, beginning with line 7, strike all through page
3, line 19, and insert the following:

SEC. 2. CAPITOL-FLOWN FLAGS FOR FAMILIES OF DECEASED LAW
ENFORCEMENT OFFICERS AND DECEASED FIREFIGHTERS.

(a) Definitions.--In this Act:
(1) Capitol-flown flag.--The term ``Capitol-flown flag''
means a United States flag flown over the United States
Capitol and provided under this Act to honor the deceased law
enforcement officer or firefighter for whom such flag is
requested.
(2) Deceased firefighter.--The term ``deceased
firefighter'' means a person who--
(A) performs firefighting duties on a paid or voluntary
basis; and
(B) dies in the line of duty as a firefighter.
(3) Deceased law enforcement officer.--The term ``deceased
law enforcement officer'' means a person who was charged with
protecting public safety, who was authorized to make arrests
by a Federal, State, Tribal, county, or local law enforcement
agency, and who died while acting in the line of duty.
(4) Member of Congress.--The term ``Member of Congress''
means a Senator, a Representative in Congress, or a Delegate
to Congress.
(b) Member Offices.--
(1) In general.--The family of a deceased law enforcement
officer or a deceased firefighter may request that a Member
of Congress provide to that family a Capitol-flown flag.
(2) Expense.--The costs associated with providing a flag
under this subsection may be paid from official funds.
(c) Applicability.--This Act shall only apply to a deceased
law enforcement officer or a deceased firefighter who died on
or after the date of enactment of this Act.
______

SA 684. Mrs. BOXER proposed an amendment to the bill H.R. 1298, to
provide assistance to foreign countries to combat HIV/AIDS,
tuberculosis, and malaria, and for other purposes; as follows:

On Page 29, line 15, insert before the semicolon the
following: ``, including the development and implementation
of a specific plan to provide resources to households headed
by an individual who is caring for one or more AIDS
orphans''.
______

SA 685. Mr. DODD proposed an amendment to the bill H.R. 1298, to
provide assistance to foreign countries to combat HIV/AIDS,
tuberculosis, and malaria, and for other purposes; as follows:

On page 31, line 19, insert the following after the second
comma on that line:
``Antigua and Barbuda, the Bahamas, Barbados, Belize,
Dominica, Grenada, Jamaica, Montserrat, St. Kitts and Nevis,
St. Vincent and the Grenadines, St. Lucia, Suriname, Trinidad
and Tobago, Dominican Republic,''
______

SA 686. Mr. BIDEN (for himself, Mr. Leahy) proposed an amendment to
the bill H.R. 1298, to provide assistance to foreign countries to
combat HIV/AIDS, tuberculosis, and malaria, and for other purposes as
follows:

At the end of the bill, insert the following:

TITLE V--INTERNATIONAL FINANCIAL INSTITUTIONS

SEC. 501. MODIFICATION OF THE ENHANCED HIPC INITIATIVE.

Title XVI of the International Financial Institutions Act
(22 U.S.C. 262p--262p-7) is amended by adding at the end the
following new section:

``SEC. 1625. MODIFICATION OF THE ENHANCED HIPC INITIATIVE.

``(a) Authority.--
``(1) In general.--The Secretary of the Treasury should
immediately commence efforts within the Paris Club of
Official Creditors, the International Bank for Reconstruction
and Development, the International Monetary Fund, and other
appropriate multilateral development institutions to modify
the Enhanced HIPC Initiative so that the amount of debt stock
reduction approved for a country eligible for debt relief
under the Enhanced HIPC Initiative shall be sufficient to
reduce, for each of the first 3 years after the date of
enactment of this section or the Decision Point, whichever is
later--
``(A) the net present value of the outstanding public and
publicly guaranteed debt of the country--
``(i) as of the decision point if the country has already
reached its decision point, or
(ii) as of the date of enactment of this Act, if the
country has not reached its decision point, to not more than
150 percent of the annual value of exports of the country for
the year preceding the Decision Point; and
``(B) the annual payments due on such public and publicly
guaranteed debt to not more than--
``(i) 10 percent or, in the case of a country suffering a
public health crisis (as defined in subsection (e)), not more
than 5 percent, of the amount of the annual current revenues
received by the country from internal resources; or
``(ii) a percentage of the gross national product of the
country, or another benchmark, that will yield a result
substantially equivalent to that which would be achieved
through application of subparagraph (A).
``(2) Limitation.--In financing the objectives of the
Enhanced HIPC Initiative, an international financial
institution shall give priority to using its own resources.
``(b) Relation to Poverty and the Environment.--Debt
cancellation under the modifications to the Enhanced HIPC
Initiative described in subsection (a) should not be
conditioned on any agreement by an impoverished country to
implement or comply with policies that deepen poverty or
degrade the environment, including any policy that--
``(1) implements or extends user fees on primary education
or primary health care, including prevention and treatment
efforts for HIV/AIDS, tuberculosis, malaria, and infant,
child, and maternal well-being;
``(2) provides for increased cost recovery from poor people
to finance basic public services such as education, health
care, clean water, or sanitation;
``(3) reduces the country's minimum wage to a level of less
than $2 per day or undermines workers' ability to exercise
effectively their internationally recognized worker rights,
as defined under section 526(e) of the Foreign Operations,
Export Financing and Related Programs Appropriations Act,
1995 (22 U.S.C. 262p-4p); or
``(4) promotes unsustainable extraction of resources or
results in reduced budget support for environmental programs.
``(c) Conditions.--A country shall not be eligible for
cancellation of debt under modifications to the Enhanced HIPC
Initiative described in subsection (a) if the government of
the country--
``(1) has an excessive level of military expenditures;
``(2) has repeatedly provided support for acts of
international terrorism, as determined by the Secretary of
State under section 6(j)(1) of the Export Administration Act
of 1979 (50 U.S.C. App. 2405(j)(1)) or section 620A(a) of the
Foreign Assistance Act of 1961 (22 U.S.C. 2371(a));
``(3) is failing to cooperate on international narcotics
control matters; or
``(4) engages in a consistent pattern of gross violations
of internationally recognized human rights (including its
military or other security forces).
``(d) Programs To Combat HIV/AIDS and Poverty.--A country
that is otherwise eligible to receive cancellation of debt
under the modifications to the Enhanced HIPC Initiative
described in subsection (a) may receive such cancellation
only if the country has agreed--
``(1) to ensure that the financial benefits of debt
cancellation are applied to programs to combat HIV/AIDS and
poverty, in particular through concrete measures to improve
basic services in health, education, nutrition, and other
development priorities, and to redress environmental
degradation;

[[Page S6567]]

``(2) to ensure that the financial benefits of debt
cancellation are in addition to the government's total
spending on poverty reduction for the previous year or the
average total of such expenditures for the previous 3 years,
whichever is greater;
``(3) to implement transparent and participatory
policymaking and budget procedures, good governance, and
effective anticorruption measures; and
``(4) to broaden public participation and popular
understanding of the principles and goals of poverty
reduction.
``(e) Definitions.--In this section:
``(1) Country suffering a public health crisis.--The term
`country suffering a public health crisis' means a country in
which the HIV/AIDS infection rate, as reported in the most
recent epidemiological data for that country compiled by the
Joint United Nations Program on HIV/AIDS, is at least 5
percent among women attending prenatal clinics or more than
20 percent among individuals in groups with high-risk
behavior.
``(2) Decision point.--The term `Decision Point' means the
date on which the executive boards of the International Bank
for Reconstruction and Development and the International
Monetary Fund review the debt sustainability analysis for a
country and determine that the country is eligible for debt
relief under the Enhanced HIPC Initiative.
``(3) Enhanced hipc initiative.--The term `Enhanced HIPC
Initiative' means the multilateral debt initiative for
heavily indebted poor countries presented in the Report of G-
7 Finance Ministers on the Cologne Debt Initiative to the
Cologne Economic Summit, Cologne, June 18-20, 1999.''.

SEC. 502. REPORT ON EXPANSION OF DEBT RELIEF TO NON-HIPC
COUNTRIES.

(a) In General.--Not later than 90 days after the date of
enactment of this Act, the Secretary of the Treasury shall
submit to Congress a report on--
(1) the options and costs associated with the expansion of
debt relief provided by the Enhanced HIPC Initiative to
include poor countries that were not eligible for inclusion
in the Enhanced HIPC Initiative;
(2) options for burden-sharing among donor countries and
multilateral institutions of costs associated with the
expansion of debt relief; and
(3) options, in addition to debt relief, to ensure debt
sustainability in poor countries, particularly in cases when
the poor country has suffered an external economic shock or a
natural disaster.
(b) Specific Options To Be Considered.--Among the options
for the expansion of debt relief provided by the Enhanced
HIPC Initiative, consideration should be given to making
eligible for that relief poor countries for which outstanding
public and publicly guaranteed debt requires annual payments
in excess of 10 percent or, in the case of a country
suffering a public health crisis (as defined in section
1625(e) of the Financial Institutions Act, as added by
section 501 of this Act), not more than 5 percent, of the
amount of the annual current revenues received by the country
from internal resources.
(c) Enhanced HIPC Initiative Defined.--In this section, the
term ``Enhanced HIPC Initiative'' means the multilateral debt
initiative for heavily indebted poor countries presented in
the Report of G-7 Finance Ministers on the Cologne Debt
Initiative to the Cologne Economic Summit, Cologne, June 18-
20, 1999.

SEC. 503. AUTHORIZATION OF APPROPRIATIONS.

(a) In General.--There are authorized to be appropriated to
the President such sums as may be necessary for the fiscal
year 2004 and each fiscal year thereafter to carry out
section 1625 of the International Financial Institutions Act,
as added by section 501 of this Act.
(b) Availability of Funds.--Amounts appropriated pursuant
to subsection (a) are authorized to remain available until
expended.

____________________