I 

108TH CONGRESS 

1ST SESSION H. R. 2325

To amend the Internal Revenue Code of 1986 to accelerate the increase 

in the refundability of the child tax credit, and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 4, 2003

Ms. DELAURO (for herself, Mr. ALEXANDER, Mr. EMANUEL, Mr. RANGEL, 

Mr. HOYER, Mr. DAVIS of Alabama, Ms. SCHAKOWSKY, Mr. LEVIN, Mr. 

STARK, Mr. CARDIN, Mr. STENHOLM, Mr. JEFFERSON, Mr. NEAL of 

Massachusetts, Mr. LEWIS of Georgia, Mr. SPRATT, Mr. MCDERMOTT, 

Mr. BROWN of Ohio, Mr. OBERSTAR, Mr. RODRIGUEZ, Mr. OLVER, Mr. 

MCGOVERN, Mr. GEORGE MILLER of California, Mr. MORAN of Virginia, 

Mr. CAPUANO, Mr. LANGEVIN, Mr. MENENDEZ, Mr. HINCHEY, Mr. 

SERRANO, Mr. GONZALEZ, Mr. BOUCHER, Mr. RYAN of Ohio, Ms. 

SLAUGHTER, Ms. WOOLSEY, Mrs. LOWEY, Mr. EVANS, Ms. ESHOO, Mr. 

FORD, Mr. ENGEL, Mr. TANNER, Ms. LEE, Mrs. DAVIS of California, Mr. 

TIERNEY, Mr. LANTOS, Mr. BAIRD, Ms. ROYBAL-ALLARD, Mr. MCNULTY, Mr. SANDLIN, Mr. MICHAUD, Mr. INSLEE, Mr. MARKEY, Mr. 

GRIJALVA, Mr. DAVIS of Florida, Mr. BLUMENAUER, Mr. ISRAEL, Mr. 

DELAHUNT, Mr. HOEFFEL, Mr. REYES, Mr. CLYBURN, Mr. WYNN, Mr. 

PALLONE, Ms. BORDALLO, Mr. CONYERS, Mr. PASCRELL, Ms. SOLIS, 

Mr. COOPER, Mrs. MALONEY, Mr. TOWNS, Ms. CORRINE BROWN of Florida, Mr. POMEROY, Mr. DOGGETT, Mr. BERRY, Mr. DAVIS of Tennessee, 

Mr. TAYLOR of Mississippi, Mr. SKELTON, Mr. STRICKLAND, Mr. UDALL

of New Mexico, Mr. DEFAZIO, Mr. SANDERS, Ms. KAPTUR, Mr. DOYLE, 

Mr. SCOTT of Virginia, Mr. ABERCROMBIE, Mrs. MCCARTHY of New 

York, Ms. DEGETTE, Mr. ACEVEDO-VILA ́, Mr. JOHN, Mrs. CAPPS, Mr. 

CROWLEY, Mr. EDWARDS, Mr. CUMMINGS, Mr. SCOTT of Georgia, Mr. 

FROST, Mr. KUCINICH, Mr. MATSUI, Mr. HASTINGS of Florida, Mr. 

THOMPSON of Mississippi, Mr. MEEHAN, Ms. MCCOLLUM, Mr. CASE, Mr. 

HINOJOSA, Mr. HOLT, Mr. OWENS, Mr. CARDOZA, Mr. RUPPERSBERGER, 

Mr. PRICE of North Carolina, Mr. OBEY, Mr. BOSWELL, Mr. JACKSON

of Illinois, Mr. LAMPSON, Mr. PASTOR, Mr. ORTIZ, Mr. BECERRA, and 

Mr. FILNER) introduced the following bill; which was referred to the 

Committee on Ways and Means 
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A BILL

To amend the Internal Revenue Code of 1986 to accelerate 

the increase in the refundability of the child tax credit, 

and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Working Taxpayer 

5 Fairness Restoration Act of 2003’’. 

6 TITLE I—ACCELERATION OF IN7 CREASE IN REFUNDABILITY 

8 OF THE CHILD TAX CREDIT 

9 SEC. 101. ACCELERATION OF INCREASE IN REFUNDABILITY 

10 OF THE CHILD TAX CREDIT. 

11 (a) IN GENERAL.—Section 24(d)(1)(B)(i) of the In12 ternal Revenue Code of 1986 (relating to portion of credit 

13 refundable) is amended by striking ‘‘(10 percent in the 

14 case of taxable years beginning before January 1, 2005)’’. 

15 (b) EFFECTIVE DATE.—The amendment made by 

16 this section shall apply to taxable years beginning after 

17 December 31, 2002. 
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1 TITLE II—REVENUE PROVISIONS 

2 Subtitle A—Enron-Related Tax 

3 Shelter Provisions 

4 SEC. 201. LIMITATION ON TRANSFER OR IMPORTATION OF 

5 BUILT-IN LOSSES. 

6 (a) IN GENERAL.—Section 362 of the Internal Rev7 enue Code of 1986 (relating to basis to corporations) is 

8 amended by adding at the end the following new sub9 section: 

10 ‘‘(e) LIMITATIONS ON BUILT-IN LOSSES.—

11 ‘‘(1) LIMITATION ON IMPORTATION OF BUILT12 IN LOSSES.—

13 ‘‘(A) IN GENERAL.—If in any transaction 

14 described in subsection (a) or (b) there would 

15 (but for this subsection) be an importation of a 

16 net built-in loss, the basis of each property de17 scribed in subparagraph (B) which is acquired 

18 in such transaction shall (notwithstanding sub19 sections (a) and (b)) be its fair market value 

20 immediately after such transaction. 

21 ‘‘(B) PROPERTY DESCRIBED.—For pur22 poses of subparagraph (A), property is de23 scribed in this subparagraph if—

24 ‘‘(i) gain or loss with respect to such 

25 property is not subject to tax under this 
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1 subtitle in the hands of the transferor im2 mediately before the transfer, and 

3 ‘‘(ii) gain or loss with respect to such 

4 property is subject to such tax in the 

5 hands of the transferee immediately after 

6 such transfer. 

7 In any case in which the transferor is a part8 nership, the preceding sentence shall be applied 

9 by treating each partner in such partnership as 

10 holding such partner’s proportionate share of 

11 the property of such partnership.

12 ‘‘(C) IMPORTATION OF NET BUILT-IN

13 LOSS.—For purposes of subparagraph (A), 

14 there is an importation of a net built-in loss in 

15 a transaction if the transferee’s aggregate ad16 justed bases of property described in subpara17 graph (B) which is transferred in such trans18 action would (but for this paragraph) exceed 

19 the fair market value of such property imme20 diately after such transaction.’’. 

21 ‘‘(2) LIMITATION ON TRANSFER OF BUILT-IN

22 LOSSES IN SECTION 351 TRANSACTIONS.—

23 ‘‘(A) IN GENERAL.—If—

24 ‘‘(i) property is transferred by a 

25 transferor in any transaction which is de-
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1 scribed in subsection (a) and which is not 

2 described in paragraph (1) of this sub3 section, and 

4 ‘‘(ii) the transferee’s aggregate ad5 justed bases of such property so trans6 ferred would (but for this paragraph) ex7 ceed the fair market value of such property 

8 immediately after such transaction, 

9 then, notwithstanding subsection (a), the trans10 feree’s aggregate adjusted bases of the property 

11 so transferred shall not exceed the fair market 

12 value of such property immediately after such 

13 transaction. 

14 ‘‘(B) ALLOCATION OF BASIS REDUC15 TION.—The aggregate reduction in basis by 

16 reason of subparagraph (A) shall be allocated 

17 among the property so transferred in proportion 

18 to their respective built-in losses immediately 

19 before the transaction. 

20 ‘‘(C) EXCEPTION FOR TRANSFERS WITHIN

21 AFFILIATED GROUP.—Subparagraph (A) shall 

22 not apply to any transaction if the transferor 

23 owns stock in the transferee meeting the re24 quirements of section 1504(a)(2). In the case of 

25 property to which subparagraph (A) does not 
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1 apply by reason of the preceding sentence, the 

2 transferor’s basis in the stock received for such 

3 property shall not exceed its fair market value 

4 immediately after the transfer.’’. 

5 (b) COMPARABLE TREATMENT WHERE LIQUIDA6 TION.—Paragraph (1) of section 334(b) of the Internal 

7 Revenue Code of 1986 (relating to liquidation of sub8 sidiary) is amended to read as follows: 

9 ‘‘(1) IN GENERAL.—If property is received by a 

10 corporate distributee in a distribution in a complete 

11 liquidation to which section 332 applies (or in a 

12 transfer described in section 337(b)(1)), the basis of 

13 such property in the hands of such distributee shall 

14 be the same as it would be in the hands of the trans15 feror; except that the basis of such property in the 

16 hands of such distributee shall be the fair market 

17 value of the property at the time of the distribu18 tion—

19 ‘‘(A) in any case in which gain or loss is 

20 recognized by the liquidating corporation with 

21 respect to such property, or 

22 ‘‘(B) in any case in which the liquidating 

23 corporation is a foreign corporation, the cor24 porate distributee is a domestic corporation, 

25 and the corporate distributee’s aggregate ad-
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1 justed bases of property described in section 

2 362(e)(1)(B) which is distributed in such liq3 uidation would (but for this subparagraph) ex4 ceed the fair market value of such property im5 mediately after such liquidation.’’. 

6 (c) EFFECTIVE DATE.—The amendments made by 

7 this section shall apply to transactions after February 13, 

8 2003. 

9 SEC. 202. NO REDUCTION OF BASIS UNDER SECTION 734 IN 

10 STOCK HELD BY PARTNERSHIP IN COR11 PORATE PARTNER. 

12 (a) IN GENERAL.—Section 755 of the Internal Rev13 enue Code of 1986 is amended by adding at the end the 

14 following new subsection: 

15 ‘‘(c) NO ALLOCATION OF BASIS DECREASE TO

16 STOCK OF CORPORATE PARTNER.—In making an alloca17 tion under subsection (a) of any decrease in the adjusted 

18 basis of partnership property under section 734(b)—

19 ‘‘(1) no allocation may be made to stock in a 

20 corporation (or any person which is related (within 

21 the meaning of section 267(b) or 707(b)(1)) to such 

22 corporation) which is a partner in the partnership, 

23 and 
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1 ‘‘(2) any amount not allocable to stock by rea2 son of paragraph (1) shall be allocated under sub3 section (a) to other partnership property. 

4 Gain shall be recognized to the partnership to the extent 

5 that the amount required to be allocated under paragraph 

6 (2) to other partnership property exceeds the aggregate 

7 adjusted basis of such other property immediately before 

8 the allocation required by paragraph (2).’’. 

9 (b) EFFECTIVE DATE.—The amendment made by 

10 this section shall apply to distributions after February 13, 

11 2003. 

12 SEC. 203. REPEAL OF SPECIAL RULES FOR FASITS. 

13 (a) IN GENERAL.—Part V of subchapter M of chap14 ter 1 of the Internal Revenue Code of 1986 (relating to 

15 financial asset securitization investment trusts) is hereby 

16 repealed. 

17 (b) CONFORMING AMENDMENTS.—

18 (1) Paragraph (6) of section 56(g) of the Inter19 nal Revenue Code of 1986 is amended by striking 

20 ‘‘REMIC, or FASIT’’ and inserting ‘‘or REMIC’’. 

21 (2) Clause (ii) of section 382(l)(4)(B) of such 

22 Code is amended by striking ‘‘a REMIC to which 

23 part IV of subchapter M applies, or a FASIT to 

24 which part V of subchapter M applies,’’ and insert-
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1 ing ‘‘or a REMIC to which part IV of subchapter M 

2 applies,’’. 

3 (3) Paragraph (1) of section 582(c) of such 

4 Code is amended by striking ‘‘, and any regular in5 terest in a FASIT,’’. 

6 (4) Subparagraph (E) of section 856(c)(5) of 

7 such Code is amended by striking the last sentence. 

8 (5) Paragraph (5) of section 860G(a) of such 

9 Code is amended by adding ‘‘and’’ at the end of sub10 paragraph (B), by striking ‘‘, and’’ at the end of 

11 subparagraph (C) and inserting a period, and by 

12 striking subparagraph (D).

13 (6) Subparagraph (C) of section 1202(e)(4) of 

14 such Code is amended by striking ‘‘REMIC, or 

15 FASIT’’ and inserting ‘‘or REMIC’’. 

16 (7) Subparagraph (C) of section 7701(a)(19) of 

17 such Code is amended by adding ‘‘and’’ at the end 

18 of clause (ix), by striking ‘‘, and’’ at the end of 

19 clause (x) and inserting a period, and by striking 

20 clause (xi). 

21 (8) The table of parts for subchapter M of 

22 chapter 1 of such Code is amended by striking the 

23 item relating to part V. 

24 (c) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section 

3 shall take effect on February 14, 2003. 

4 (2) EXCEPTION FOR EXISTING FASITS.—The 

5 amendments made by this section shall not apply to 

6 any FASIT in existence on the date of the enact7 ment of this Act to the extent that regular interests 

8 issued by the FASIT before such date continue to 

9 remain outstanding in accordance with the original 

10 terms of issuance of such interests. 

11 SEC. 204. EXPANDED DISALLOWANCE OF DEDUCTION FOR 

12 INTEREST ON CONVERTIBLE DEBT. 

13 (a) IN GENERAL.—Paragraph (2) of section 163(l) 

14 of the Internal Revenue Code of 1986 is amended by strik15 ing ‘‘or a related party’’ and inserting ‘‘or equity held by 

16 the issuer (or any related party) in any other person’’. 

17 (b) EXCEPTION FOR CERTAIN INSTRUMENTS ISSUED

18 BY DEALERS IN SECURITIES.—Section 163(l) of the In19 ternal Revenue Code of 1986 is amended by redesignating 

20 paragraphs (4) and (5) as paragraphs (5) and (6) and 

21 by inserting after paragraph (3) the following new para22 graph: 

23 ‘‘(4) EXCEPTION FOR CERTAIN INSTRUMENTS

24 ISSUED BY DEALERS IN SECURITIES.—For purposes 

25 of this subsection, the term ‘disqualified debt instru-
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1 ment’ does not include indebtedness issued by a 

2 dealer in securities (or a related party) which is pay3 able in, or by reference to, equity (other than equity 

4 of the issuer or a related party) held by such dealer 

5 in its capacity as a dealer in securities. For purposes 

6 of this paragraph, the term ‘dealer in securities’ has 

7 the meaning given such term by section 475.’’. 

8 (c) CONFORMING AMENDMENT.—Paragraph (3) of 

9 section 163(l) of the Internal Revenue Code of 1986 is 

10 amended by striking ‘‘or a related party’’ in the material 

11 preceding subparagraph (A) and inserting ‘‘or any other 

12 person’’. 

13 (d) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to debt instruments issued after 

15 February 13, 2003. 

16 SEC. 205. EXPANDED AUTHORITY TO DISALLOW TAX BENE17 FITS UNDER SECTION 269. 

18 (a) IN GENERAL.—Subsection (a) of section 269 of 

19 the Internal Revenue Code of 1986 (relating to acquisi20 tions made to evade or avoid income tax) is amended to 

21 read as follows: 

22 ‘‘(a) IN GENERAL.—If—

23 ‘‘(1)(A) any person acquires stock in a corpora24 tion, or 
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1 ‘‘(B) any corporation acquires, directly or indi2 rectly, property of another corporation and the basis 

3 of such property, in the hands of the acquiring cor4 poration, is determined by reference to the basis in 

5 the hands of the transferor corporation, and 

6 ‘‘(2) the principal purpose for which such acqui7 sition was made is evasion or avoidance of Federal 

8 income tax by securing the benefit of a deduction, 

9 credit, or other allowance, 

10 then the Secretary may disallow such deduction, credit, 

11 or other allowance.’’. 

12 (b) EFFECTIVE DATE.—The amendment made by 

13 this section shall apply to stock and property acquired 

14 after February 13, 2003. 

15 SEC. 206. MODIFICATIONS OF CERTAIN RULES RELATING 

16 TO CONTROLLED FOREIGN CORPORATIONS. 

17 (a) LIMITATION ON EXCEPTION FROM PFIC RULES

18 FOR UNITED STATES SHAREHOLDERS OF CONTROLLED

19 FOREIGN CORPORATIONS.—Paragraph (2) of section 

20 1297(e) of the Internal Revenue Code of 1986 (relating 

21 to passive investment company) is amended by adding at 

22 the end the following flush sentence: 

23 ‘‘Such term shall not include any period if there is 

24 only a remote likelihood of an inclusion in gross in-
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1 come under section 951(a)(1)(A)(i) of subpart F in2 come of such corporation for such period.’’. 

3 (b) EFFECTIVE DATE.—The amendment made by 

4 this section shall apply to taxable years on controlled for5 eign corporation beginning after February 13, 2003, and 

6 to taxable years of United States shareholder in which or 

7 with which such taxable years of controlled foreign cor8 porations end. 

9 SEC. 207. CONTROLLED ENTITIES INELIGIBLE FOR REIT 

10 STATUS. 

11 (a) IN GENERAL.—Subsection (a) of section 856 of 

12 the Internal Revenue Code of 1986 (relating to definition

13 of real estate investment trust) is amended by striking 

14 ‘‘and’’ at the end of paragraph (6), by redesignating para15 graph (7) as paragraph (8), and by inserting after para16 graph (6) the following new paragraph: 

17 ‘‘(7) which is not a controlled entity (as defined 

18 in subsection (l)); and’’. 

19 (b) CONTROLLED ENTITY.—Section 856 of the Inter20 nal Revenue Code of 1986 is amended by adding at the 

21 end the following new subsection: 

22 ‘‘(l) CONTROLLED ENTITY.—

23 ‘‘(1) IN GENERAL.—For purposes of subsection 

24 (a)(7), an entity is a controlled entity if, at any time 
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1 during the taxable year, one person (other than a 

2 qualified entity)—

3 ‘‘(A) in the case of a corporation, owns 

4 stock—

5 ‘‘(i) possessing at least 50 percent of 

6 the total voting power of the stock of such 

7 corporation, or 

8 ‘‘(ii) having a value equal to at least 

9 50 percent of the total value of the stock 

10 of such corporation, or 

11 ‘‘(B) in the case of a trust, owns beneficial 

12 interests in the trust which would meet the re13 quirements of subparagraph (A) if such inter14 ests were stock. 

15 ‘‘(2) QUALIFIED ENTITY.—For purposes of 

16 paragraph (1), the term ‘qualified entity’ means—

17 ‘‘(A) any real estate investment trust, and 

18 ‘‘(B) any partnership in which one real es19 tate investment trust owns at least 50 percent 

20 of the capital and profits interests in the part21 nership. 

22 ‘‘(3) ATTRIBUTION RULES.—For purposes of 

23 this paragraphs (1) and (2)—

24 ‘‘(A) IN GENERAL.—Rules similar to the 

25 rules of subsections (d)(5) and (h)(3) shall 
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1 apply; except that section 318(a)(3)(C) shall 

2 not be applied under such rules to treat stock 

3 owned by a qualified entity as being owned by 

4 a person which is not a qualified entity. 

5 ‘‘(B) STAPLED ENTITIES.—A group of en6 tities which are stapled entities (as defined in 

7 section 269B(c)(2)) shall be treated as one per8 son. 

9 ‘‘(4) EXCEPTION FOR CERTAIN NEW REITS.—

10 ‘‘(A) IN GENERAL.—The term ‘controlled 

11 entity’ shall not include an incubator REIT. 

12 ‘‘(B) INCUBATOR REIT.—A corporation 

13 shall be treated as an incubator REIT for any 

14 taxable year during the eligibility period if it 

15 meets all the following requirements for such 

16 year: 

17 ‘‘(i) The corporation elects to be treat18 ed as an incubator REIT. 

19 ‘‘(ii) The corporation has only voting 

20 common stock outstanding. 

21 ‘‘(iii) Not more than 50 percent of the 

22 corporation’s real estate assets consist of 

23 mortgages. 

24 ‘‘(iv) From not later than the begin25 ning of the last half of the second taxable 
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1 year, at least 10 percent of the corpora2 tion’s capital is provided by lenders or eq3 uity investors who are unrelated to the cor4 poration’s largest shareholder. 

5 ‘‘(v) The corporation annually in6 creases the value of its real estate assets 

7 by at least 10 percent. 

8 ‘‘(vi) The directors of the corporation 

9 adopt a resolution setting forth an intent 

10 to engage in a going public transaction. 

11 No election may be made with respect to any 

12 REIT if an election under this subsection was 

13 in effect for any predecessor of such REIT. 

14 ‘‘(C) ELIGIBILITY PERIOD.—

15 ‘‘(i) IN GENERAL.—The eligibility pe16 riod (for which an incubator REIT election 

17 can be made) begins with the REIT’s sec18 ond taxable year and ends at the close of 

19 the REIT’s third taxable year, except that 

20 the REIT may, subject to clauses (ii), (iii), 

21 and (iv), elect to extend such period for an 

22 additional 2 taxable years. 

23 ‘‘(ii) GOING PUBLIC TRANSACTION.—

24 A REIT may not elect to extend the eligi25 bility period under clause (i) unless it en-
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1 ters into an agreement with the Secretary 

2 that if it does not engage in a going public 

3 transaction by the end of the extended eli4 gibility period, it shall pay Federal income 

5 taxes for the 2 years of the extended eligi6 bility period as if it had not made an incu7 bator REIT election and had ceased to 

8 qualify as a REIT for those 2 taxable 

9 years. 

10 ‘‘(iii) RETURNS, INTEREST, AND NO11 TICE.— 

12 ‘‘(I) RETURNS.—In the event the 

13 corporation ceases to be treated as a 

14 REIT by operation of clause (ii), the 

15 corporation shall file any appropriate 

16 amended returns reflecting the change 

17 in status within 3 months of the close 

18 of the extended eligibility period. 

19 ‘‘(II) INTEREST.—Interest shall 

20 be payable on any tax imposed by rea21 son of clause (ii) for any taxable year 

22 but, unless there was a finding under 

23 subparagraph (D), no substantial un24 derpayment penalties shall be im25 posed. 
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1 ‘‘(III) NOTICE.—The corporation 

2 shall, at the same time it files its re3 turns under subclause (I), notify its 

4 shareholders and any other persons 

5 whose tax position is, or may reason6 ably be expected to be, affected by the 

7 change in status so they also may file 

8 any appropriate amended returns to 

9 conform their tax treatment consistent

10 with the corporation’s loss of REIT 

11 status. 

12 ‘‘(IV) REGULATIONS.—The Sec13 retary shall provide appropriate regu14 lations setting forth transferee liabil15 ity and other provisions to ensure col16 lection of tax and the proper adminis17 tration of this provision. 

18 ‘‘(iv) Clauses (ii) and (iii) shall not 

19 apply if the corporation allows its incu20 bator REIT status to lapse at the end of 

21 the initial 2-year eligibility period without 

22 engaging in a going public transaction if 

23 the corporation is not a controlled entity as 

24 of the beginning of its fourth taxable year. 

25 In such a case, the corporation’s directors 
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1 may still be liable for the penalties de2 scribed in subparagraph (D) during the eli3 gibility period. 

4 ‘‘(D) SPECIAL PENALTIES.—If the Sec5 retary determines that an incubator REIT elec6 tion was filed for a principal purpose other than 

7 as part of a reasonable plan to undertake a 

8 going public transaction, an excise tax of 

9 $20,000 shall be imposed on each of the cor10 poration’s directors for each taxable year for 

11 which an election was in effect. 

12 ‘‘(E) GOING PUBLIC TRANSACTION.—For 

13 purposes of this paragraph, a going public 

14 transaction means—

15 ‘‘(i) a public offering of shares of the 

16 stock of the incubator REIT; 

17 ‘‘(ii) a transaction, or series of trans18 actions, that results in the stock of the in19 cubator REIT being regularly traded on an 

20 established securities market and that re21 sults in at least 50 percent of such stock 

22 being held by shareholders who are unre23 lated to persons who held such stock before 

24 it began to be so regularly traded; or 
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1 ‘‘(iii) any transaction resulting in 

2 ownership of the REIT by 200 or more 

3 persons (excluding the largest single share4 holder) who in the aggregate own at least 

5 50 percent of the stock of the REIT. 

6 For the purposes of this subparagraph, the 

7 rules of paragraph (3) shall apply in deter8 mining the ownership of stock. 

9 ‘‘(F) DEFINITIONS.—The term ‘established 

10 securities market’ shall have the meaning set 

11 forth in the regulations under section 897.’’. 

12 (c) CONFORMING AMENDMENT.—Paragraph (2) of 

13 section 856(h) of the Internal Revenue Code of 1986 is 

14 amended by striking ‘‘and (6)’’ each place it appears and 

15 inserting ‘‘, (6), and (7)’’. 

16 (d) EFFECTIVE DATE.—

17 (1) IN GENERAL.—The amendments made by 

18 this section shall apply to taxable years ending after 

19 May 8, 2003. 

20 (2) EXCEPTION FOR EXISTING CONTROLLED

21 ENTITIES.—The amendments made by this section 

22 shall not apply to any entity which is a controlled 

23 entity (as defined in section 856(l) of the Internal 

24 Revenue Code of 1986, as added by this section) as 

25 of May 8, 2003, which is a real estate investment 
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1 trust for the taxable year which includes such date, 

2 and which has significant business assets or activi3 ties as of such date. For purposes of the preceding 

4 sentence, an entity shall be treated as such a con5 trolled entity on May 8, 2003, if it becomes such an 

6 entity after such date in a transaction—

7 (A) made pursuant to a written agreement 

8 which was binding on such date and at all times 

9 thereafter, or 

10 (B) described on or before such date in a 

11 filing with the Securities and Exchange Com12 mission required solely by reason of the trans13 action. 

14 Subtitle B—Extension of Internal 

15 Revenue Service User Fees 

16 SEC. 211. EXTENSION OF INTERNAL REVENUE SERVICE 

17 USER FEES. 

18 (a) IN GENERAL.—Chapter 77 of the Internal Rev19 enue Code of 1986 (relating to miscellaneous provisions) 

20 is amended by adding at the end the following new section: 

21 ‘‘SEC. 7528. INTERNAL REVENUE SERVICE USER FEES. 

22 ‘‘(a) GENERAL RULE.—The Secretary shall establish 

23 a program requiring the payment of user fees for—
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1 ‘‘(1) requests to the Internal Revenue Service 

2 for ruling letters, opinion letters, and determination 

3 letters, and 

4 ‘‘(2) other similar requests. 

5 ‘‘(b) PROGRAM CRITERIA.—

6 ‘‘(1) IN GENERAL.—The fees charged under the 

7 program required by subsection (a)—

8 ‘‘(A) shall vary according to categories (or 

9 subcategories) established by the Secretary, 

10 ‘‘(B) shall be determined after taking into 

11 account the average time for (and difficulty of) 

12 complying with requests in each category (and 

13 subcategory), and 

14 ‘‘(C) shall be payable in advance. 

15 ‘‘(2) EXEMPTIONS, ETC.—

16 ‘‘(A) IN GENERAL.—The Secretary shall 

17 provide for such exemptions (and reduced fees) 

18 under such program as the Secretary deter19 mines to be appropriate. 

20 ‘‘(B) EXEMPTION FOR CERTAIN REQUESTS

21 REGARDING PENSION PLANS.—The Secretary 

22 shall not require payment of user fees under 

23 such program for requests for determination 

24 letters with respect to the qualified status of a 

25 pension benefit plan maintained solely by 1 or 
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1 more eligible employers or any trust which is 

2 part of the plan. The preceding sentence shall 

3 not apply to any request—

4 ‘‘(i) made after the later of—

5 ‘‘(I) the fifth plan year the pen6 sion benefit plan is in existence, or 

7 ‘‘(II) the end of any remedial 

8 amendment period with respect to the 

9 plan beginning within the first 5 plan 

10 years, or 

11 ‘‘(ii) made by the sponsor of any pro12 totype or similar plan which the sponsor 

13 intends to market to participating employ14 ers. 

15 ‘‘(C) DEFINITIONS AND SPECIAL RULES.—

16 For purposes of subparagraph (B)—

17 ‘‘(i) PENSION BENEFIT PLAN.—The 

18 term ‘pension benefit plan’ means a pen19 sion, profit-sharing, stock bonus, annuity, 

20 or employee stock ownership plan. 

21 ‘‘(ii) ELIGIBLE EMPLOYER.—The 

22 term ‘eligible employer’ means an eligible 

23 employer (as defined in section 

24 408(p)(2)(C)(i)(I)) which has at least 1 

25 employee who is not a highly compensated 
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1 employee (as defined in section 414(q)) 

2 and is participating in the plan. The deter3 mination of whether an employer is an eli4 gible employer under subparagraph (B) 

5 shall be made as of the date of the request 

6 described in such subparagraph. 

7 ‘‘(iii) DETERMINATION OF AVERAGE

8 FEES CHARGED.—For purposes of any de9 termination of average fees charged, any 

10 request to which subparagraph (B) applies 

11 shall not be taken into account. 

12 ‘‘(3) AVERAGE FEE REQUIREMENT.—The aver13 age fee charged under the program required by sub14 section (a) shall not be less than the amount deter15 mined under the following table:

‘‘Category Average Fee

Employee plan ruling and opinion ........................................... $250

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

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

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

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

16 ‘‘(c) TERMINATION.—No fee shall be imposed under 

17 this section with respect to requests made after September 

18 30, 2013.’’. 

19 (b) CONFORMING AMENDMENTS.—
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1 (1) The table of sections for chapter 77 of the 

2 Internal Revenue Code of 1986 is amended by add3 ing at the end the following new item:

‘‘Sec. 7528. Internal Revenue Service user fees.’’.

4 (2) Section 10511 of the Revenue Act of 1987 

5 is repealed. 

6 (3) Section 620 of the Economic Growth and 

7 Tax Relief Reconciliation Act of 2001 is repealed. 

8 (c) LIMITATIONS.—Notwithstanding any other provi9 sion of law, any fees collected pursuant to section 7528 

10 of the Internal Revenue Code of 1986, as added by sub11 section (a), shall not be expended by the Internal Revenue 

12 Service unless provided by an appropriations Act. 

13 (d) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to requests made after the date 

15 of the enactment of this Act.

Æ