To amend the Internal Revenue Code of 1986 to accelerate the increase in the refundability of the child tax credit, and for other purposes.

TEXT OF AMENDMENTS--June 3, 2003

SA 843. Mrs. FEINSTEIN proposed an amendment to amendment SA 539
proposed by Mr. Frist (for himself, Mr. Daschle, Mr. Inhofe, Mr.
Dorgan, Mr. Lugar, Mr. Johnson, Mr. Grassley, Mr. Harkin, Mr. Hagel,
Mr. Durbin, Mr. Voinovich, Mr. Nelson of Nebraska, Mr. Talent, Mr.
Dayton, Mr. Coleman, Mr. Edwards, Mr. Crapo, Mr. Conrad, Mr. DeWine,
and Mr. Baucus) to the bill S. 14, to enhance the energy security of
the United States, and for other purposes; as follows:

On page 12, strike lines 19 through 24 and insert the
following:
``(i) based on a determination by the Administrator, after
public notice and opportunity for comment, that
implementation of the renewable fuel requirement--

``(I) is not needed for the State or region to comply with
this Act because the State or region can comply in ways other
than adding renewable fuel; or
``(II) would harm the economy or environment of a State, a
region, or the United States; or''.

______

SA 844. Mrs. FEINSTEIN (for herself, Mr. Nickles, Mr. McCain, Mr.
Kyl, Mr. Gregg, Mr. Wyden, Mr. Leahy, Mr. Schumer, Mr. Sununu, and Mr.
Reed) proposed an amendment to amendment SA 539 proposed by Mr. Frist
(for himself, Mr. Daschle, Mr. Inhofe, Mr. Dorgan, Mr. Lugar, Mr.
Johnson, Mr. Grassley, Mr. Harkin, Mr. Hagel, Mr. Durbin, Mr.
Voinovich, Mr. Nelson of Nebraska, Mr. Talent, Mr. Dayton, Mr. Coleman,
Mr. Edwards, Mr. Crapo, Mr. Conrad, Mr. DeWine, and Mr. Baucus) to the
bill S. 14, to enhance the energy security of the United States, and
for other purposes; as follows:

On page 6, between lines 17 and 18, insert the following:
``(C) Election by states.--The renewable fuel program shall
apply to a State only if

[[Page S7260]]

the Governor of the State notifies the Administrator that the
State elects to participate in the renewable fuel program.
______

SA 845. Mr. BINGAMAN (for Mrs. Lincoln) proposed an amendment to
amendment SA 539 proposed by Mr. Frist (for himself, Mr. Daschle, Mr.
Inhofe, Mr. Dorgan, Mr. Lugar, Mr. Johnson, Mr. Grassley, Mr. Harkin,
Mr. Hagel, Mr. Durbin, Mr. Voinovich, Mr. Nelson of Nebraska, Mr.
Talent, Mr. Dayton, Mr. Coleman, Mr. Edwards, Mr. Crapo, Mr. Conrad,
Mr. DeWine, and Mr. Baucus) to the bill S. 14, to enhance the energy
security of the United States, and for other purposes; as follows:

At the end of the amendment, insert the following:

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

(a) Acceleration of Refundability.--
(1) In general.--Section 24(d)(1)(B)(i) of the Internal
Revenue Code of 1986 (relating to portion of credit
refundable) is amended by striking ``(10 percent in the case
of taxable years beginning before January 1, 2005)''.
(2) Effective date.--The amendment made by this subsection
shall apply to taxable years beginning after December 31,
2002.
(b) Advance Payment.--
(1) In general.--Subsection (b) of section 6429 of the
Internal Revenue Code of 1986 (relating to advance payment of
portion of increased child credit for 2003) 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 new paragraph:
``(4) section 24(d)(1)(B)(i) applied without regard to the
parenthetical therein.''.
(2) Effective date.--The amendments made by this subsection
shall take effect as if included in the amendments made by
section 101(b) of the Jobs and Growth Tax Relief
Reconciliation Act of 2003.

SEC. __. LIMITATION ON TRANSFER OR IMPORTATION OF BUILT-IN
LOSSES.

(a) In General.--Section 362 of the Internal Revenue Code
of 1986 (relating to basis to corporations) is amended by
adding at the end the following new subsection:
``(e) Limitations on Built-In Losses.--
``(1) Limitation on importation of built-in losses.--
``(A) In general.--If in any transaction described in
subsection (a) or (b) there would (but for this subsection)
be an importation of a net built-in loss, the basis of each
property described in subparagraph (B) which is acquired in
such transaction shall (notwithstanding subsections (a) and
(b)) be its fair market value immediately after such
transaction.
``(B) Property described.--For purposes of subparagraph
(A), property is described in this subparagraph if--
``(i) gain or loss with respect to such property is not
subject to tax under this subtitle in the hands of the
transferor immediately before the transfer, and
``(ii) gain or loss with respect to such property is
subject to such tax in the hands of the transferee
immediately after such transfer.

In any case in which the transferor is a partnership, the
preceding sentence shall be applied by treating each partner
in such partnership as holding such partner's proportionate
share of the property of such partnership.
``(C) Importation of net built-in loss.--For purposes of
subparagraph (A), there is an importation of a net built-in
loss in a transaction if the transferee's aggregate adjusted
bases of property described in subparagraph (B) which is
transferred in such transaction would (but for this
paragraph) exceed the fair market value of such property
immediately after such transaction.''.

``(2) Limitation on transfer of built-in losses in section
351 transactions.--
``(A) In general.--If--
``(i) property is transferred by a transferor in any
transaction which is described in subsection (a) and which is
not described in paragraph (1) of this subsection, and
``(ii) the transferee's aggregate adjusted bases of such
property so transferred would (but for this paragraph) exceed
the fair market value of such property immediately after such
transaction,
then, notwithstanding subsection (a), the transferee's
aggregate adjusted bases of the property so transferred shall
not exceed the fair market value of such property immediately
after such transaction.
``(B) Allocation of basis reduction.--The aggregate
reduction in basis by reason of subparagraph (A) shall be
allocated among the property so transferred in proportion to
their respective built-in losses immediately before the
transaction.
``(C) Exception for transfers within affiliated group.--
Subparagraph (A) shall not apply to any transaction if the
transferor owns stock in the transferee meeting the
requirements of section 1504(a)(2). In the case of property
to which subparagraph (A) does not apply by reason of the
preceding sentence, the transferor's basis in the stock
received for such property shall not exceed its fair market
value immediately after the transfer.''.
(b) Comparable Treatment Where Liquidation.--Paragraph (1)
of section 334(b) of the Internal Revenue Code of 1986
(relating to liquidation of subsidiary) is amended to read as
follows:
``(1) In general.--If property is received by a corporate
distributee in a distribution in a complete liquidation to
which section 332 applies (or in a transfer described in
section 337(b)(1)), the basis of such property in the hands
of such distributee shall be the same as it would be in the
hands of the transferor; except that the basis of such
property in the hands of such distributee shall be the fair
market value of the property at the time of the
distribution--
``(A) in any case in which gain or loss is recognized by
the liquidating corporation with respect to such property, or
``(B) in any case in which the liquidating corporation is a
foreign corporation, the corporate distributee is a domestic
corporation, and the corporate distributee's aggregate
adjusted bases of property described in section 362(e)(1)(B)
which is distributed in such liquidation would (but for this
subparagraph) exceed the fair market value of such property
immediately after such liquidation.''.
(c) Effective Date.--The amendments made by this section
shall apply to transactions after February 13, 2003.

SEC. __. NO REDUCTION OF BASIS UNDER SECTION 734 IN STOCK
HELD BY PARTNERSHIP IN CORPORATE PARTNER.

(a) In General.--Section 755 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new
subsection:
``(c) No Allocation of Basis Decrease to Stock of Corporate
Partner.--In making an allocation under subsection (a) of any
decrease in the adjusted basis of partnership property under
section 734(b)--
``(1) no allocation may be made to stock in a corporation
(or any person which is related (within the meaning of
section 267(b) or 707(b)(1)) to such corporation) which is a
partner in the partnership, and
``(2) any amount not allocable to stock by reason of
paragraph (1) shall be allocated under subsection (a) to
other partnership property.

Gain shall be recognized to the partnership to the extent
that the amount required to be allocated under paragraph (2)
to other partnership property exceeds the aggregate adjusted
basis of such other property immediately before the
allocation required by paragraph (2).''.
(b) Effective Date.--The amendment made by this section
shall apply to distributions after February 13, 2003.

SEC. __. REPEAL OF SPECIAL RULES FOR FASITS.

(a) In General.--Part V of subchapter M of chapter 1 of the
Internal Revenue Code of 1986 (relating to financial asset
securitization investment trusts) is hereby repealed.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 56(g) of the Internal Revenue
Code of 1986 is amended by striking ``REMIC, or FASIT'' and
inserting ``or REMIC''.
(2) Clause (ii) of section 382(l)(4)(B) of such Code is
amended by striking ``a REMIC to which part IV of subchapter
M applies, or a FASIT to which part V of subchapter M
applies,'' and inserting ``or a REMIC to which part IV of
subchapter M applies,''.
(3) Paragraph (1) of section 582(c) of such Code is amended
by striking ``, and any regular interest in a FASIT,''.
(4) Subparagraph (E) of section 856(c)(5) of such Code is
amended by striking the last sentence.
(5) Paragraph (5) of section 860G(a) of such Code is
amended by adding ``and'' at the end of subparagraph (B), by
striking ``, and'' at the end of subparagraph (C) and
inserting a period, and by striking subparagraph (D).
(6) Subparagraph (C) of section 1202(e)(4) of such Code is
amended by striking ``REMIC, or FASIT'' and inserting ``or
REMIC''.
(7) Subparagraph (C) of section 7701(a)(19) of such Code is
amended by adding ``and'' at the end of clause (ix), by
striking ``, and'' at the end of clause (x) and inserting a
period, and by striking clause (xi).
(8) The table of parts for subchapter M of chapter 1 of
such Code is amended by striking the item relating to part V.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall take effect on February
14, 2003.
(2) Exception for existing fasits.--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.

SEC. __. EXPANDED DISALLOWANCE OF DEDUCTION FOR INTEREST ON
CONVERTIBLE DEBT.

(a) In General.--Paragraph (2) of section 163(l) of the
Internal Revenue Code of 1986 is amended by striking ``or a
related party'' and inserting ``or equity held by the issuer
(or any related party) in any other person''.
(b) Exception for Certain Instruments Issued By Dealers In
Securities.--Section 163(l) of the Internal Revenue Code of
1986 is amended by redesignating paragraphs (4) and (5) as
paragraphs (5) and (6) and by inserting after paragraph (3)
the following new paragraph:
``(4) Exception for certain instruments issued by dealers
in securities.--For purposes of this subsection, the term
`disqualified debt instrument' does not include indebtedness
issued by a dealer in securities (or a related party) which
is payable in, or

[[Page S7261]]

by reference to, equity (other than equity of the issuer or a
related party) held by such dealer in its capacity as a
dealer in securities. For purposes of this paragraph, the
term `dealer in securities' has the meaning given such term
by section 475.''.
(c) Conforming Amendment.--Paragraph (3) of section 163(l)
of the Internal Revenue Code of 1986 is amended by striking
``or a related party'' in the material preceding subparagraph
(A) and inserting ``or any other person''.
(d) Effective Date.--The amendments made by this section
shall apply to debt instruments issued after February 13,
2003.

SEC. __. EXPANDED AUTHORITY TO DISALLOW TAX BENEFITS UNDER
SECTION 269.

(a) In General.--Subsection (a) of section 269 of the
Internal Revenue Code of 1986 (relating to acquisitions made
to evade or avoid income tax) is amended to read as follows:
``(a) In General.--If--
``(1)(A) any person acquires stock in a corporation, or
``(B) any corporation acquires, directly or indirectly,
property of another corporation and the basis of such
property, in the hands of the acquiring corporation, is
determined by reference to the basis in the hands of the
transferor corporation, and
``(2) the principal purpose for which such acquisition was
made is evasion or avoidance of Federal income tax by
securing the benefit of a deduction, credit, or other
allowance,

then the Secretary may disallow such deduction, credit, or
other allowance.''.
(b) Effective Date.--The amendment made by this section
shall apply to stock and property acquired after February 13,
2003.

SEC. __. MODIFICATIONS OF CERTAIN RULES RELATING TO
CONTROLLED FOREIGN CORPORATIONS.

(a) Limitation on Exception From PFIC Rules for United
States Shareholders of Controlled Foreign Corporations.--
Paragraph (2) of section 1297(e) of the Internal Revenue Code
of 1986 (relating to passive investment company) is amended
by adding at the end the following flush sentence:

``Such term shall not include any period if there is only a
remote likelihood of an inclusion in gross income under
section 951(a)(1)(A)(i) of subpart F income of such
corporation for such period.''.
(b) Effective Date.--The amendment made by this section
shall apply to taxable years on controlled foreign
corporation beginning after February 13, 2003, and to taxable
years of United States shareholder in which or with which
such taxable years of controlled foreign corporations end.

SEC. __. CONTROLLED ENTITIES INELIGIBLE FOR REIT STATUS.

(a) In General.--Subsection (a) of section 856 of the
Internal Revenue Code of 1986 (relating to definition of real
estate investment trust) is amended by striking ``and'' at
the end of paragraph (6), by redesignating paragraph (7) as
paragraph (8), and by inserting after paragraph (6) the
following new paragraph:
``(7) which is not a controlled entity (as defined in
subsection (l)); and''.
(b) Controlled Entity.--Section 856 of the Internal Revenue
Code of 1986 is amended by adding at the end the following
new subsection:
``(l) Controlled Entity.--
``(1) In general.--For purposes of subsection (a)(7), an
entity is a controlled entity if, at any time during the
taxable year, one person (other than a qualified entity)--
``(A) in the case of a corporation, owns stock--
``(i) possessing at least 50 percent of the total voting
power of the stock of such corporation, or
``(ii) having a value equal to at least 50 percent of the
total value of the stock of such corporation, or
``(B) in the case of a trust, owns beneficial interests in
the trust which would meet the requirements of subparagraph
(A) if such interests were stock.
``(2) Qualified entity.--For purposes of paragraph (1), the
term `qualified entity' means--
``(A) any real estate investment trust, and
``(B) any partnership in which one real estate investment
trust owns at least 50 percent of the capital and profits
interests in the partnership.
``(3) Attribution rules.--For purposes of this paragraphs
(1) and (2)--
``(A) In general.--Rules similar to the rules of
subsections (d)(5) and (h)(3) shall apply; except that
section 318(a)(3)(C) shall not be applied under such rules to
treat stock owned by a qualified entity as being owned by a
person which is not a qualified entity.
``(B) Stapled entities.--A group of entities which are
stapled entities (as defined in section 269B(c)(2)) shall be
treated as one person.
``(4) Exception for certain new reits.--
``(A) In general.--The term `controlled entity' shall not
include an incubator REIT.
``(B) Incubator reit.--A corporation shall be treated as an
incubator REIT for any taxable year during the eligibility
period if it meets all the following requirements for such
year:
``(i) The corporation elects to be treated as an incubator
REIT.
``(ii) The corporation has only voting common stock
outstanding.
``(iii) Not more than 50 percent of the corporation's real
estate assets consist of mortgages.
``(iv) From not later than the beginning of the last half
of the second taxable year, at least 10 percent of the
corporation's capital is provided by lenders or equity
investors who are unrelated to the corporation's largest
shareholder.
``(v) The corporation annually increases the value of its
real estate assets by at least 10 percent.
``(vi) The directors of the corporation adopt a resolution
setting forth an intent to engage in a going public
transaction.
No election may be made with respect to any REIT if an
election under this subsection was in effect for any
predecessor of such REIT.
``(C) Eligibility period.--
``(i) In general.--The eligibility period (for which an
incubator REIT election can be made) begins with the REIT's
second taxable year and ends at the close of the REIT's third
taxable year, except that the REIT may, subject to clauses
(ii), (iii), and (iv), elect to extend such period for an
additional 2 taxable years.
``(ii) Going public transaction.--A REIT may not elect to
extend the eligibility period under clause (i) unless it
enters into an agreement with the Secretary that if it does
not engage in a going public transaction by the end of the
extended eligibility period, it shall pay Federal income
taxes for the 2 years of the extended eligibility period as
if it had not made an incubator REIT election and had ceased
to qualify as a REIT for those 2 taxable years.
``(iii) Returns, interest, and notice.--

``(I) Returns.--In the event the corporation ceases to be
treated as a REIT by operation of clause (ii), the
corporation shall file any appropriate amended returns
reflecting the change in status within 3 months of the close
of the extended eligibility period.
``(II) Interest.--Interest shall be payable on any tax
imposed by reason of clause (ii) for any taxable year but,
unless there was a finding under subparagraph (D), no
substantial underpayment penalties shall be imposed.
``(III) Notice.--The corporation shall, at the same time it
files its returns under subclause (I), notify its
shareholders and any other persons whose tax position is, or
may reasonably be expected to be, affected by the change in
status so they also may file any appropriate amended returns
to conform their tax treatment consistent with the
corporation's loss of REIT status.
``(IV) Regulations.--The Secretary shall provide
appropriate regulations setting forth transferee liability
and other provisions to ensure collection of tax and the
proper administration of this provision.

``(iv) Clauses (ii) and (iii) shall not apply if the
corporation allows its incubator REIT status to lapse at the
end of the initial 2-year eligibility period without engaging
in a going public transaction if the corporation is not a
controlled entity as of the beginning of its fourth taxable
year. In such a case, the corporation's directors may still
be liable for the penalties described in subparagraph (D)
during the eligibility period.
``(D) Special penalties.--If the Secretary determines that
an incubator REIT election was filed for a principal purpose
other than as part of a reasonable plan to undertake a going
public transaction, an excise tax of $20,000 shall be imposed
on each of the corporation's directors for each taxable year
for which an election was in effect.
``(E) Going public transaction.--For purposes of this
paragraph, a going public transaction means--
``(i) a public offering of shares of the stock of the
incubator REIT;
``(ii) a transaction, or series of transactions, that
results in the stock of the incubator REIT being regularly
traded on an established securities market and that results
in at least 50 percent of such stock being held by
shareholders who are unrelated to persons who held such stock
before it began to be so regularly traded; or
``(iii) any transaction resulting in ownership of the REIT
by 200 or more persons (excluding the largest single
shareholder) who in the aggregate own at least 50 percent of
the stock of the REIT.

For the purposes of this subparagraph, the rules of paragraph
(3) shall apply in determining the ownership of stock.
``(F) Definitions.--The term `established securities
market' shall have the meaning set forth in the regulations
under section 897.''.
(c) Conforming Amendment.--Paragraph (2) of section 856(h)
of the Internal Revenue Code of 1986 is amended by striking
``and (6)'' each place it appears and inserting ``, (6), and
(7)''.
(d) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years ending after May 8, 2003.
(2) Exception for existing controlled entities.--The
amendments made by this section shall not apply to any entity
which is a controlled entity (as defined in section 856(l) of
the Internal Revenue Code of 1986, as added by this section)
as of May 8, 2003, which is a real estate investment trust
for the taxable year which includes such date, and which has
significant business assets or activities as of such date.
For purposes of the preceding sentence, an entity shall be
treated as such a controlled entity on May 8, 2003, if it
becomes such an entity after such date in a transaction--
(A) made pursuant to a written agreement which was binding
on such date and at all times thereafter, or

[[Page S7262]]

(B) described on or before such date in a filing with the
Securities and Exchange Commission required solely by reason
of the transaction.

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

(a) In General.--Chapter 77 of the Internal Revenue Code of
1986 (relating to miscellaneous provisions) is amended by
adding at the end the following new section:

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

``(a) General Rule.--The Secretary shall establish a
program requiring the payment of user fees for--
``(1) requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters, and
``(2) other similar requests.
``(b) Program Criteria.--
``(1) In general.--The fees charged under the program
required by subsection (a)--
``(A) shall vary according to categories (or subcategories)
established by the Secretary,
``(B) shall be determined after taking into account the
average time for (and difficulty of) complying with requests
in each category (and subcategory), and
``(C) shall be payable in advance.
``(2) Exemptions, etc.--
``(A) In general.--The Secretary shall provide for such
exemptions (and reduced fees) under such program as the
Secretary determines to be appropriate.
``(B) Exemption for certain requests regarding pension
plans.--The Secretary shall not require payment of user fees
under such program for requests for determination letters
with respect to the qualified status of a pension benefit
plan maintained solely by 1 or more eligible employers or any
trust which is part of the plan. The preceding sentence shall
not apply to any request--
``(i) made after the later of--

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

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

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

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

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

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

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

``(c) Termination.--No fee shall be imposed under this
section with respect to requests made after September 30,
2013.''.
(b) Conforming Amendments.--
(1) The table of sections for chapter 77 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new item:

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

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

SA 846. Mr. FITZGERALD (for Mr. Gregg) proposed an amendment to the
bill S. 313, to amend the Federal Food, Drug, and Cosmetic Act to
establish a program of fees relating to animal drugs; as follows:

Strike all after the enacting clause and insert the
following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Animal Drug User Fee Act of
2003''.

SEC. 2. FINDINGS.

Congress finds as follows:
(1) Prompt approval of safe and effective new animal drugs
is critical to the improvement of animal health and the
public health.
(2) Animal health and the public health will be served by
making additional funds available for the purpose of
augmenting the resources of the Food and Drug Administration
that are devoted to the process for review of new animal drug
applications.
(3) The fees authorized by this title will be dedicated
toward expediting the animal drug development process and the
review of new and supplemental animal drug applications and
investigational animal drug submissions as set forth in the
goals identified, for purposes of part 3 of subchapter C of
chapter VII of the Federal Food, Drug, and Cosmetic Act, in
the letters from the Secretary of Health and Human Services
to the Chairman of the Committee on Energy and Commerce of
the House of Representatives and the Chairman of the
Committee on Health, Education, Labor, and Pensions of the
Senate as set forth in the Congressional Record.

SEC. 3. FEES RELATING TO ANIMAL DRUGS.

Subchapter C of chapter VII of the Federal Food, Drug and
Cosmetic Act (21 U.S.C. 379f et seq.) is amended by adding at
the end the following part:

``PART 4--FEES RELATING TO ANIMAL DRUGS

``SEC. 739. AUTHORITY TO ASSESS AND USE ANIMAL DRUG FEES.

``(a) Definitions.--For purposes of this subchapter:
``(1) The term `animal drug application' means an
application for approval of any new animal drug submitted
under section 512(b)(1). Such term does not include either a
new animal drug application submitted under section 512(b)(2)
or a supplemental animal drug application.
``(2) The term `supplemental animal drug application'
means--
``(A) a request to the Secretary to approve a change in an
animal drug application which has been approved; or
``(B) a request to the Secretary to approve a change to an
application approved under section 512(c)(2) for which data
with respect to safety or effectiveness are required.
``(3) The term `animal drug product' means each specific
strength or potency of a particular active ingredient or
ingredients in final dosage form marketed by a particular
manufacturer or distributor, which is uniquely identified by
the labeler code and product code portions of the national
drug code, and for which an animal drug application or a
supplemental animal drug application has been approved.
``(4) The term `animal drug establishment' means a foreign
or domestic place of business which is at one general
physical location consisting of one or more buildings all of
which are within 5 miles of each other, at which one or more
animal drug products are manufactured in final dosage form.
``(5) The term `investigational animal drug submission'
means--
``(A) the filing of a claim for an investigational
exemption under section 512(j) for a new animal drug intended
to be the subject of an animal drug application or a
supplemental animal drug application, or
``(B) the submission of information for the purpose of
enabling the Secretary to evaluate the safety or
effectiveness of an animal drug application or supplemental
animal drug application in the event of their filing.
``(6) The term `animal drug sponsor' means either an
applicant named in an animal drug application, except for an
approved application for which all subject products have been
removed from listing under section 510, or a person who has
submitted an investigational animal drug submission that has
not been terminated or otherwise rendered inactive by the
Secretary.
``(7) The term `final dosage form' means, with respect to
an animal drug product, a finished dosage form which is
approved for administration to an animal without substantial
further manufacturing. Such term includes animal drug
products intended for mixing in animal feeds.
``(8) The term `process for the review of animal drug
applications' means the following activities of the Secretary
with respect to the review of animal drug applications,
supplemental animal drug applications, and investigational
animal drug submissions:
``(A) The activities necessary for the review of animal
drug applications, supplemental animal drug applications, and
investigational animal drug submissions.
``(B) The issuance of action letters which approve animal
drug applications or supplemental animal drug applications or
which set forth in detail the specific deficiencies in animal
drug applications, supplemental animal drug applications, or
investigational animal drug submissions and, where
appropriate, the actions necessary to place such
applications, supplements or submissions in condition for
approval.
``(C) The inspection of animal drug establishments and
other facilities undertaken as part of the Secretary's review
of pending animal drug applications, supplemental animal drug
applications, and investigational animal drug submissions.
``(D) Monitoring of research conducted in connection with
the review of animal drug applications, supplemental animal
drug applications, and investigational animal drug
submissions.
``(E) The development of regulations and policy related to
the review of animal drug applications, supplemental animal
drug applications, and investigational animal drug
submissions.
``(F) Development of standards for products subject to
review.
``(G) Meetings between the agency and the animal drug
sponsor.

[[Page S7263]]

``(H) Review of advertising and labeling prior to approval
of an animal drug application or supplemental animal drug
application, but not such activities after an animal drug has
been approved.
``(9) The term `costs of resources allocated for the
process for the review of animal drug applications' means the
expenses incurred in connection with the process for the
review of animal drug applications for--
``(A) officers and employees of the Food and Drug
Administration, contractors of the Food and Drug
Administration, advisory committees consulted with respect to
the review of specific animal drug applications, supplemental
animal drug applications, or investigational animal drug
submissions, and costs related to such officers, employees,
committees, and contractors, including costs for travel,
education, and recruitment and other personnel activities,
``(B) management of information, and the acquisition,
maintenance, and repair of computer resources,
``(C) leasing, maintenance, renovation, and repair of
facilities and acquisition, maintenance, and repair of
fixtures, furniture, scientific equipment, and other
necessary materials and supplies, and
``(D) collecting fees under this section and accounting for
resources allocated for the review of animal drug
applications, supplemental animal drug applications, and
investigational animal drug submissions.
``(10) The term `adjustment factor' applicable to a fiscal
year refers to the formula set forth in section 735(8) with
the base or comparator year being 2003.
``(11) The term `affiliate' refers to the definition set
forth in section 735(9).
``(b) Types of Fees.--Beginning in fiscal year 2004, the
Secretary shall assess and collect fees in accordance with
this section as follows:
``(1) Animal drug application and supplement fee.--
``(A) In general.--Each person that submits, on or after
September 1, 2003, an animal drug application or a
supplemental animal drug application shall be subject to a
fee as follows:
``(i) A fee established in subsection (c) for an animal
drug application; and
``(ii) A fee established in subsection (c) for a
supplemental animal drug application for which safety or
effectiveness data are required, in an amount that is equal
to 50 percent of the amount of the fee under clause (i).
``(B) Payment.--The fee required by subparagraph (A) shall
be due upon submission of the animal drug application or
supplemental animal drug application.
``(C) Exception for previously filed application or
supplement.--If an animal drug application or a supplemental
animal drug application was submitted by a person that paid
the fee for such application or supplement, was accepted for
filing, and was not approved or was withdrawn (without a
waiver or refund), the submission of an animal drug
application or a supplemental animal drug application for the
same product by the same person (or the person's licensee,
assignee, or successor) shall not be subject to a fee under
subparagraph (A).
``(D) Refund of fee if application refused for filing.--The
Secretary shall refund 75 percent of the fee paid under
subparagraph (B) for any animal drug application or
supplemental animal drug application which is refused for
filing.
``(E) Refund of fee if application withdrawn.--If an animal
drug application or a supplemental animal drug application is
withdrawn after the application or supplement was filed, the
Secretary may refund the fee or portion of the fee paid under
subparagraph (B) if no substantial work was performed on the
application or supplement after the application or supplement
was filed. The Secretary shall have the sole discretion to
refund the fee under this paragraph. A determination by the
Secretary concerning a refund under this paragraph shall not
be reviewable.
``(2) Animal drug product fee.--Each person--
``(A) who is named as the applicant in an animal drug
application or supplemental animal drug application for an
animal drug product which has been submitted for listing
under section 510, and
``(B) who, after September 1, 2003, had pending before the
Secretary an animal drug application or supplemental animal
drug application;

shall pay for each such animal drug product the annual fee
established in subsection (c). Such fee shall be payable for
the fiscal year in which the animal drug product is first
submitted for listing under section 510, or is submitted for
relisting under section 510 if the animal drug product has
been withdrawn from listing and relisted. After such fee is
paid for that fiscal year, such fee shall be payable on or
before January 31 of each year. Such fee shall be paid only
once for each animal drug product for a fiscal year in which
the fee is payable.
``(3) Animal drug establishment fee.--Each person--
``(A) who owns or operates, directly or through an
affiliate, an animal drug establishment, and
``(B) who is named as the applicant in an animal drug
application or supplemental animal drug application for an
animal drug product which has been submitted for listing
under section 510, and
``(C) who, after September 1, 2003, had pending before the
Secretary an animal drug application or supplemental animal
drug application,

shall be assessed an annual fee established in subsection (c)
for each animal drug establishment listed in its approved
animal drug application as an establishment that manufactures
the animal drug product named in the application. The annual
establishment fee shall be assessed in each fiscal year in
which the animal drug product named in the application is
assessed a fee under paragraph (2) unless the animal drug
establishment listed in the application does not engage in
the manufacture of the animal drug product during the fiscal
year. The fee shall be paid on or before January 31 of each
year. The establishment shall be assessed only one fee per
fiscal year under this section, provided, however, that where
a single establishment manufactures both animal drug products
and prescription drug products, as defined in section 735(3),
such establishment shall be assessed both the animal drug
establishment fee and the prescription drug establishment
fee, as set forth in section 736(a)(2), within a single
fiscal year.
``(4) Animal drug sponsor fee.--Each person--
``(A) who meets the definition of an animal drug sponsor
within a fiscal year; and
``(B) who, after September 1, 2003, had pending before the
Secretary an animal drug application, a supplemental animal
drug application, or an investigational animal drug
submission,

shall be assessed an annual fee established under subsection
(c). The fee shall be paid on or before January 31 of each
year. Each animal drug sponsor shall pay only one such fee
each fiscal year.
``(c) Fee Amounts.--Except as provided in subsection (b)(1)
and subsections (d), (e), (g), and (h), the fees required
under subsection (b) shall be established to generate fee
revenue amounts as follows:
``(1) Total fee revenues for application and supplement
fees.--The total fee revenues to be collected in animal drug
application fees under subsection (b)(1)(A)(i) and
supplemental animal drug application fees under subsection
(b)(1)(A)(ii) shall be $1,250,000 in fiscal year 2004,
$2,000,000 in fiscal year 2005, and $2,500,000 in fiscal
years 2006, 2007, and 2008.
``(2) Total fee revenues for product fees.--The total fee
revenues to be collected in product fees under subsection
(b)(2) shall be $1,250,000 in fiscal year 2004, $2,000,000 in
fiscal year 2005, and $2,500,000 in fiscal years 2006, 2007,
and 2008.
``(3) Total fee revenues for establishment fees.--The total
fee revenues to be collected in establishment fees under
subsection (b)(3) shall be $1,250,000 in fiscal year 2004,
$2,000,000 in fiscal year 2005, and $2,500,000 in fiscal
years 2006, 2007, and 2008.
``(4) Total fee revenues for sponsor fees.--The total fee
revenues to be collected in sponsor fees under subsection
(b)(4) shall be $1,250,000 in fiscal year 2004, $2,000,000 in
fiscal year 2005, and $2,500,000 in fiscal years 2006, 2007,
and 2008.
``(d) Adjustments.--
``(1) Inflation adjustment.--The revenues established in
subsection (b) shall be adjusted by the Secretary by notice,
published in the Federal Register, for a fiscal year to
reflect the greater of--
``(A) the total percentage change that occurred in the
Consumer Price Index for all urban consumers (all items;
United States city average) for the 12-month period ending
June 30 preceding the fiscal year for which fees are being
established; or
``(B) the total percentage change for the previous fiscal
year in basic pay under the General Schedule in accordance
with section 5332 of title 5, United States Code, as adjusted
by any locality-based comparability payment pursuant to
section 5304 of such title for Federal employees stationed in
the District Columbia.

The adjustment made each fiscal year by this subsection will
be added on a compounded basis to the sum of all adjustments
made each fiscal year after fiscal year 2004 under this
subsection.
``(2) Workload adjustment.--After the fee revenues are
adjusted for inflation in accordance with paragraph (1), the
fee revenues shall be further adjusted each fiscal year after
fiscal year 2004 to reflect changes in review workload. With
respect to such adjustment:
``(A) This adjustment shall be determined by the Secretary
based on a weighted average of the change in the total number
of animal drug applications, supplemental animal drug
applications for which data with respect to safety or
effectiveness are required, manufacturing supplemental animal
drug applications, investigational animal drug study
submissions, and investigational animal drug protocol
submissions submitted to the Secretary. The Secretary shall
publish in the Federal Register the fees resulting from this
adjustment and the supporting methodologies.
``(B) Under no circumstances shall this workload adjustment
result in fee revenues for a fiscal year that are less than
the fee revenues for that fiscal year established in
subsection (c), as adjusted for inflation under paragraph
(1).
``(3) Final year adjustment.--For fiscal year 2008, the
Secretary may further increase the fees to provide for up to
3 months of operating reserves of carryover user fees for the
process for the review of animal drug applications for the
first 3 months of fiscal

[[Page S7264]]

year 2009 If the Food and Drug Administration has carryover
balances for the process for the review of animal drug
applications in excess of 3 months of such operating
reserves, then this adjustment will not be made. If this
adjustment is necessary, then the rationale for the amount of
the increase shall be contained in the annual notice setting
fees for fiscal year 2008
``(4) Annual fee setting.--The Secretary shall establish,
60 days before the start of each fiscal year beginning after
September 30, 2003, for that fiscal year, animal drug
application fees, supplemental animal drug application fees,
animal drug sponsor fees, animal drug establishment fees, and
animal drug product fees based on the revenue amounts
established under subsection (c) and the adjustments provided
under this subsection.
``(5) Limit.--The total amount of fees charged, as adjusted
under this subsection, for a fiscal year may not exceed the
total costs for such fiscal year for the resources allocated
for the process for the review of animal drug applications.
``(e) Fee Waiver or Reduction.--
``(1) In general.--The Secretary shall grant a waiver from
or a reduction of 1 or more fees assessed under subsection
(b) where the Secretary finds that--
``(A) the assessment of the fee would present a significant
barrier to innovation because of limited resources available
to such person or other circumstances,
``(B) the fees to be paid by such person will exceed the
anticipated present and future costs incurred by the
Secretary in conducting the process for the review of animal
drug applications for such person,
``(C) the animal drug application or supplemental animal
drug application is intended solely to provide for use of the
animal drug in--
``(i) a Type B medicated feed (as defined in section
558.3(b)(3) of title 21, Code of Federal Regulations (or any
successor regulation)) intended for use in the manufacture of
Type C free-choice medicated feeds, or
``(ii) a Type C free-choice medicated feed (as defined in
section 558.3(b)(4) of title 21, Code of Federal Regulations
(or any successor regulation)),
``(D) the animal drug application or supplemental animal
drug application is intended solely to provide for a minor
use or minor species indication, or
``(E) the sponsor involved is a small business submitting
its first animal drug application to the Secretary for
review.
``(2) Use of standard costs.--In making the finding in
paragraph (1)(B), the Secretary may use standard costs.
``(3) Rules for small businesses.--
``(A) Definition.--In paragraph (1)(E), the term ``small
business'' means an entity that has fewer than 500 employees,
including employees of affiliates.
``(B) Waiver of application fee.--The Secretary shall waive
under paragraph (1)(E) the application fee for the first
animal drug application that a small business or its
affiliate submits to the Secretary for review. After a small
business or its affiliate is granted such a waiver, the small
business or its affiliate shall pay application fees for all
subsequent animal drug applications and supplemental animal
drug applications for which safety or effectiveness data are
required in the same manner as an entity that does not
qualify as a small business.
``(C) Certification.--The Secretary shall require any
person who applies for a waiver under paragraph (1)(E) to
certify their qualification for the waiver. The Secretary
shall periodically publish in the Federal Register a list of
persons making such certifications.
``(f) Effect of Failure To Pay Fees.--An animal drug
application or supplemental animal drug application submitted
by a person subject to fees under subsection (b) shall be
considered incomplete and shall not be accepted for filing by
the Secretary until all fees owed by such person have been
paid. An investigational animal drug submission under section
738(5)(B) that is submitted by a person subject to fees under
subsection (b) shall be considered incomplete and shall not
be accepted for review by the Secretary until all fees owed
by such person have been paid. The Secretary may discontinue
review of any animal drug application, supplemental animal
drug application or investigational animal drug submission
from a person if such person has not submitted for payment
all fees owed under this section by 30 days after the date
upon which they are due.
``(g) Assessment of Fees.--
``(1) Limitation.--Fees may not be assessed under
subsection (b) for a fiscal year beginning after fiscal year
2003 unless appropriations for salaries and expenses of the
Food and Drug Administration for such fiscal year (excluding
the amount of fees appropriated for such fiscal year) are
equal to or greater than the amount of appropriations for the
salaries and expenses of the Food and Drug Administration for
the fiscal year 2003 (excluding the amount of fees
appropriated for such fiscal year) multiplied by the
adjustment factor applicable to the fiscal year involved.
``(2) Authority.--If the Secretary does not assess fees
under subsection (b) during any portion of a fiscal year
because of paragraph (1) and if at a later date in such
fiscal year the Secretary may assess such fees, the Secretary
may assess and collect such fees, without any modification in
the rate, for animal drug applications, supplemental animal
drug applications, investigational animal drug submissions,
sponsors, animal drug establishments and animal drug products
at any time in such fiscal year notwithstanding the
provisions of subsection (b) relating to the date fees are to
be paid.
``(h) Crediting and Availability of Fees.--
``(1) In general.--Fees authorized under subsection (b)
shall be collected and available for obligation only to the
extent and in the amount provided in advance in
appropriations Acts. Such fees are authorized to be
appropriated to remain available until expended. Such sums as
may be necessary may be transferred from the Food and Drug
Administration salaries and expenses appropriation account
without fiscal year limitation to such appropriation account
for salary and expenses with such fiscal year limitation. The
sums transferred shall be available solely for the process
for the review of animal drug applications.
``(2) Collections and appropriation acts.--
``(A) In general.--The fees authorized by this section--
``(i) shall be retained in each fiscal year in an amount
not to exceed the amount specified in appropriation Acts, or
otherwise made available for obligation for such fiscal year,
and
``(ii) shall only be collected and available to defray
increases in the costs of the resources allocated for the
process for the review of animal drug applications (including
increases in such costs for an additional number of full-time
equivalent positions in the Department of Health and Human
Services to be engaged in such process) over such costs,
excluding costs paid from fees collected under this section,
for fiscal year 2003 multiplied by the adjustment factor.
``(B) Compliance.--The Secretary shall be considered to
have met the requirements of subparagraph (A)(ii) in any
fiscal year if the costs funded by appropriations and
allocated for the process for the review of animal drug
applications--
``(i) are not more than 3 percent below the level specified
in subparagraph (A)(ii); or
``(ii)(I) are more than 3 percent below the level specified
in subparagraph (A)(ii), and fees assessed for the fiscal
year following the subsequent fiscal year are decreased by
the amount in excess of 3 percent by which such costs fell
below the level specified in subparagraph (A)(ii); and
``(II) such costs are not more than 5 percent below the
level specified in subparagraph (A)(ii).
``(3) Authorization of appropriations.--There are
authorized to be appropriated for fees under this section--
``(A) $5,000,000 for fiscal year 2004;
``(B) $8,000,000 for fiscal year 2005;
``(C) $10,000,000 for fiscal year 2006;
``(D) $10,000,000 for fiscal year 2007; and
``(E) $10,000,000 for fiscal year 2008;

as adjusted to reflect adjustments in the total fee revenues
made under this section and changes in the total amounts
collected by animal drug application fees, supplemental
animal drug application fees, animal drug sponsor fees,
animal drug establishment fees, and animal drug product fees.
``(4) Offset.--Any amount of fees collected for a fiscal
year under this section that exceeds the amount of fees
specified in appropriations Acts for such fiscal year shall
be credited to the appropriation account of the Food and Drug
Administration as provided in paragraph (1), and shall be
subtracted from the amount of fees that would otherwise be
authorized to be collected under this section pursuant to
appropriation Acts for a subsequent fiscal year.
``(i) Collection of Unpaid Fees.--In any case where the
Secretary does not receive payment of a fee assessed under
subsection (b) within 30 days after it is due, such fee shall
be treated as a claim of the United States Government subject
to subchapter II of chapter 37 of title 31, United States
Code.
``(j) Written Requests for Waivers, Reductions, and
Refunds.--To qualify for consideration for a waiver or
reduction under subsection (e), or for a refund of any fee
collected in accordance with subsection (b), a person shall
submit to the Secretary a written request for such waiver,
reduction, or refund not later than 180 days after such fee
is due.
``(k) Construction.--This section may not be construed to
require that the number of full-time equivalent positions in
the Department of Health and Human Services, for officers,
employees, and advisory committees not engaged in the process
of the review of animal drug applications, be reduced to
offset the number of officers, employees, and advisory
committees so engaged.
``(l) Abbreviated New Drug Applications.--The Secretary
shall--
``(1) to the extent practicable, segregate the review of
abbreviated new animal drug applications from the process for
the review of animal drug applications, and
``(2) adopt other administrative procedures to ensure that
review times of abbreviated new animal drug applications do
not increase from their current level due to activities under
the user fee program.''.

SEC. 4. ACCOUNTABILITY AND REPORTS.

(a) Public Accountability.--
(1) Consultation.--In developing recommendations to
Congress for the goals and plans for meeting the goals for
the process for the review of animal drug applications for
the fiscal years after fiscal year 2008, and for the
reauthorization of section 739 of the Federal Food, Drug, and
Cosmetic Act (as

[[Page S7265]]

added by section 3), the Secretary of Health and Human
Services (referred to in this section as the ``Secretary'')
shall consult with the Committee on Energy and Commerce of
the House of Representatives, the Committee on Health,
Education, Labor, and Pensions of the Senate, appropriate
scientific and academic experts, veterinary professionals,
representatives of consumer advocacy groups, and the
regulated industry.
(2) Recommendations.--The Secretary shall--
(A) publish in the Federal Register recommendations under
paragraph (1), after negotiations with the regulated
industry;
(B) present the recommendations to the Committees referred
to in that paragraph;
(C) hold a meeting at which the public may comment on the
recommendations; and
(D) provide for a period of 30 days for the public to
provide written comments on the recommendations.
(b) Performance Reports.--Beginning with fiscal year 2004,
not later than 60 days after the end of each fiscal year
during which fees are collected under part 3 of subchapter C
of chapter VII of the Federal Food, Drug, and Cosmetic Act,
the Secretary shall prepare and submit to the Committee on
Energy and Commerce of the House of Representatives and the
Committee on Health, Education, Labor, and Pensions of the
Senate a report concerning the progress of the Food and Drug
Administration in achieving the goals identified in the
letters described in section 2(3) of this Act toward
expediting the animal drug development process and the review
of the new and supplemental animal drug applications and
investigational animal drug submissions during such fiscal
year, the future plans of the Food and Drug Administration
for meeting the goals, the review times for abbreviated new
animal drug applications, and the administrative procedures
adopted by the Food and Drug Administration to ensure that
review times for abbreviated new animal drug applications are
not increased from their current level due to activities
under the user fee program.
(c) Fiscal Report.--Beginning with fiscal year 2004, not
later than 120 days after the end of each fiscal year during
which fees are collected under the part described in
subsection (a), the Secretary shall prepare and submit to the
Committee on Energy and Commerce of the House of
Representatives and the Committee on Health, Education,
Labor, and Pensions of the Senate a report on the
implementation of the authority for such fees during such
fiscal year and the use, by the Food and Drug Administration,
of the fees collected during such fiscal year for which the
report is made.

SEC. 5. SUNSET.

The amendments made by section 3 shall not be in effect
after October 1, 2008, and section 4 shall not be in effect
after 120 days after such date.

____________________