```

[House Report 114-762]
[From the U.S. Government Publishing Office]

114th Congress     }                                   {       Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                                   {      114-762

======================================================================

 
 UNITED STATES APPRECIATION FOR OLYMPIANS AND PARALYMPIANS ACT OF 2016

                                _______
                                

 September 20, 2016.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Brady of Texas, from the Committee on Ways and Means, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5946]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 5946) to amend the Internal Revenue Code of 1986 to 
exclude from gross income any prizes or awards won in 
competition in the Olympic Games or the Paralympic Games, 
having considered the same, report favorably thereon with an 
amendment and recommend that the bill as amended do pass.

                                CONTENTS

                                                                   Page
 I. SUMMARY AND BACKGROUND............................................2
        A. Purpose and Summary...................................     2
        B. Background and Need for Legislation...................     2
        C. Legislative History...................................     2
II. EXPLANATION OF THE BILL...........................................3
        A. Exclusion from Gross Income for the Value of Medals 
            Awarded at Olympic or Paralympic Games for Certain 
            Prizes or Awards Paid by the U.S. Olympic Committee 
            to Competitors (sec. 2 of the bill and sec. 74 of the 
            Code)................................................     3
III.VOTES OF THE COMMITTEE............................................5

IV. BUDGET EFFECTS OF THE BILL........................................5
        A. Committee Estimate of Budgetary Effects...............     5
        B. Statement Regarding New Budget Authority and Tax 
            Expenditures Budget Authority........................     5
        C. Cost Estimate Prepared by the Congressional Budget 
            Office...............................................     6
 V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE........7
        A. Committee Oversight Findings and Recommendations......     7
        B. Statement of General Performance Goals and Objectives.     7
        C. Information Relating to Unfunded Mandates.............     7
        D. Applicability of House Rule XXI 5(b)..................     7
        E. Tax Complexity Analysis...............................     8
        F. Congressional Earmarks, Limited Tax Benefits, and 
            Limited Tariff Benefits..............................     8
        G. Duplication of Federal Programs.......................     8
        H. Disclosure of Directed Rule Makings...................     8
VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED.............9

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``United States Appreciation for 
Olympians and Paralympians Act of 2016''.

SEC. 2. OLYMPIC AND PARALYMPIC MEDALS AND USOC PRIZE MONEY EXCLUDED 
                    FROM GROSS INCOME.

  (a) In General.--Section 74 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new subsection:
  ``(d) Exception for Olympic and Paralympic Medals and Prizes.--
          ``(1) In general.--Gross income shall not include the value 
        of any medal awarded in, or any prize money received from the 
        United States Olympic Committee on account of, competition in 
        the Olympic Games or Paralympic Games.
          ``(2) Limitation based on adjusted gross income.--
                  ``(A) In general.--Paragraph (1) shall not apply to 
                any taxpayer for any taxable year if the adjusted gross 
                income (determined without regard to this subsection) 
                of such taxpayer for such taxable year exceeds 
                $1,000,000 (half of such amount in the case of a 
                married individual filing a separate return).
                  ``(B) Coordination with other limitations.--For 
                purposes of sections 86, 135, 137, 199, 219, 221, 222, 
                and 469, adjusted gross income shall be determined 
                after the application of paragraph (1) and before the 
                application of subparagraph (A).''.
  (b) Effective Date.--The amendment made by this section shall apply 
to prizes and awards received after December 31, 2015.

                       I. SUMMARY AND BACKGROUND

                         A. Purpose and Summary

    The bill, H.R. 5946, as reported by the Committee on Ways 
and Means, excludes the value of Olympic medals and prize money 
awarded by the U.S. Olympic Committee for competition in the 
Olympic or Paralympic Games from gross income.

                 B. Background and Need for Legislation

    While the Committee continues to work on comprehensive tax 
reform as a critical means of promoting economic growth and job 
creation, the Committee believes it is important to provide 
immediate relief from unfair taxes. The Committee believes that 
this exclusion of the value of Olympic and Paralympic medals 
and prizes from gross income will eliminate an unfair tax 
burden.

                         C. Legislative History

Background

    H.R. 5946 was introduced on September 7, 2016, and was 
referred to the Committee on Ways and Means.

Committee action

    The Committee on Ways and Means marked up H.R. 5946, the 
``United States Appreciation for Olympians and Paralympians Act 
of 2016,'' on September 14, 2016, and ordered the bill, as 
amended, favorably reported (with a quorum being present).

Committee hearings

    No hearings have been held on H.R. 5946.

                      II. EXPLANATION OF THE BILL

   A. Exclusion from Gross Income for the Value of Medals Awarded at 
 Olympic or Paralympic Games and for Certain Prizes or Awards Paid by 
the U.S. Olympic Committee to Competitors (sec. 2 of the bill and sec. 
                            74 of the Code)

                              PRESENT LAW

    U.S. citizens and residents are subject to U.S. taxation on 
their worldwide income, from whatever source derived,\1\ absent 
a specific statutory exception. Prizes and awards are 
specifically included in income.\2\ If prizes or awards are 
provided in the form of goods or services, the fair market 
value of the goods or services provided is the amount to be 
included in income.\3\
---------------------------------------------------------------------------
    \1\Sec. 61.
    \2\Sec. 74.
    \3\Treas. Reg. sec. 1.74-1(a)(2).
---------------------------------------------------------------------------
    There are three exceptions to the general rule of inclusion 
of prizes and awards: First, qualified scholarships described 
in section 117; second, certain employee achievement awards; 
and third, awards for religious, charitable, scientific, 
educational, artistic, literary or civic achievement, provided 
that the recipient takes no action to be considered for the 
award, requests that the monetary award be transferred to a 
designated governmental unit or tax-exempt organization to 
which deductible charitable contributions are permitted, and is 
not required to render future substantial services as a 
condition of the award.\4\ Examples of awards that may qualify 
for the third exception if the monies associated with the award 
are timely donated include the Nobel and Pulitzer prizes. In 
contrast, prizes or awards in recognition of athletic 
achievement are generally ineligible for the exception.\5\
---------------------------------------------------------------------------
    \4\Treas. Reg. sec. 1.74-1(b).
    \5\Wills v. Commissioner, 48 T.C. 308 (1967), aff'd 411 F.2d 537 
(9th Cir. 1969), in which the Court held that the value of the S. Rae 
Hickock Belt, awarded to baseball player Maury Wills as outstanding 
professional athlete of the year, was includible in income as a prize 
or award given for athletic achievement, and ineligible for the 
exception available for awards based on educational, civil, literary, 
scientific or artistic achievement.
---------------------------------------------------------------------------
    The United States Olympic Committee (``USOC'') is a 
corporation created by statute to serve as a coordinating body 
for United States participation in international competitive 
amateur sports, in order to provide ``the most competent 
amateur representation possible in each event'' in the Olympic, 
Paralympic and Pan-American Games.\6\ As part of its 
activities, the USOC awards each U.S. Olympic athlete prize 
money for each medal won, in the amounts of $25,000 for each 
gold medal, $15,000 for each silver medal, and $10,000 for each 
bronze medal. U.S. Paralympic athletes receive $5,000, $3,500 
and $2,500 respectively for each gold, silver and bronze medal 
awarded.\7\ All U.S. Olympians and U.S. Paralympians are 
required to be U.S. citizens.\8\ As a result, these performance 
awards from the USOC are includible as prizes and awards, 
regardless of whether the athletes derive the income for 
activities performed inside, or outside, the United States.\9\ 
The prize money awarded to U.S. athletes by the USOC, as well 
as the fair market value of gold, silver, and bronze medals, is 
includible in gross income.
---------------------------------------------------------------------------
    \6\See generally, 36 U.S.C. secs. 220501 through 220512. The 
organization does not generally receive Federal funding, although 
specific programs for veterans of U.S. military service receive Federal 
assistance. Instead, the organization raises funds from donors as well 
as revenue from licensing of use of the US Olympic team name and 
insignia, as well as granting of broadcast rights in the United States. 
The purposes of the organization are enumerated in section 220503, and 
include promotion of physical fitness and sports participation 
generally, financial assistance to athletes or sport federations, 
development of training facilities and technical support to amateur 
athletic programs that support sports that are included in the 
Olympics, Paralympics and Pan-Am games. The USOC provides a quadrennial 
report to Congress on its operations. The most recent report, covering 
the period 2009 through 2012, was issued June 1, 2013, and is available 
at http://www.teamusa.org/Footer/Legal/Governance-Documents. 
    \7\Based solely on recent metal prices, the values of the medals 
awarded at the Rio games are bear the following approximate values of 
$565 for the gold, $305 for the silver and $5 for the bronze. See, Reid 
Carlson, ``The Monetary Worth of the 2016 Rio Olympic Medals,'' 
SwimSwam, available at https://swimswam.com/monetary-worth-rio-medals.
    \8\The international governing bodies of the Olympic and Paralympic 
games permit certain exceptions for athletes from countries that do not 
have national organizations eligible to enter teams in the games. See, 
Rule 41 and related by-laws, The International Olympic Committee 
Charter, available at http://www.teamusa.org/About-the-USOC/Inside-the-
USOC/Olympic-Movement/Structure, and Chapter 3.1, The International 
Paralympic Committee Handbook, available at https://www.paralympic.org/
sites/default/files/document/160523070735592_Rio%2BQG_23_May_2016.pdf. 
Peter Spiro, ``Citizenship and the Olympics,'' 5 Insights, (Spring 
2016), published by American Bar Association, http://
www.americanbar.org/publications/insights_on_law_/16/spring-2016/
citizenship-and-the-olympics.
    \9\A credit may be allowed for any foreign income tax imposed on 
awards for games held outside the United States. Many Olympic host 
countries (including the United States) exempt nonresident athletes 
from income tax on awards. As in the United States, these exemptions 
may be part of a host country's tax law, and some contracts between the 
International Olympic Committee and Olympic host cities confirm the 
exemption. Under a typical contract, the host city and the host city's 
Organizing Committee promise either that the host country will not tax 
performance awards or, if the host country does tax performance awards, 
that the host city or Organizing Committee will reimburse athletes for 
the amount of the tax. For example, Rio de Janeiro entered into a Host 
City Contract containing this clause. A draft contract corresponding to 
the 2022 Olympics in China also contains this clause.
---------------------------------------------------------------------------

                           REASONS FOR CHANGE

    The Committee believes that the athletes who represent the 
United States on the global stage at the Olympic and Paralympic 
games perform a valuable patriotic service. The athletes do so 
only after years of personal sacrifice to attain the level of 
excellence required to compete at the Olympic and Paralympic 
games. The Committee also believes that during their years of 
training and preparation, many athletes representing the United 
States in the games earn little or no money from participation 
in their chosen sports and often defer pursuit of careers 
outside sports. Monetary prizes awarded by the USOC to 
medalists on the U.S. teams are intended to reward such 
sacrifices and to provide incentives to other athletes who seek 
to represent the United States on a global stage. The Committee 
believes that providing this exclusion for the receipt of an 
Olympic or Paralympic medal and other prizes awarded by the 
USOC generally should be without tax consequences.

                        EXPLANATION OF PROVISION

    The provision creates a new exception to the general rule 
requiring inclusion of prizes and awards in gross income. Under 
the terms of the exception, neither the value of the medals 
awarded to U.S. Olympic or Paralympic athletes nor the cash 
prizes given by the USOC are includible in income for Federal 
tax purposes. This exclusion does not apply to taxpayers whose 
adjusted gross income (determined without regard to the value 
of such medals or rewards) is in excess of $1,000,000 (or half 
such amount in the case of a married taxpayer filing a separate 
return).

                             EFFECTIVE DATE

    The provision applies to prizes and awards received after 
December 31, 2015.

                      III. VOTES OF THE COMMITTEE

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 5946, the ``United States Appreciation 
for Olympians and Paralympians Act of 2016,'' on September 14, 
2016.
    An amendment by Mr. Pascrell to the amendment in the nature 
of a substitute, which would subject the exclusion for the 
value of Olympic or Paralympic prizes and awards to an income 
limitation, was agreed to by unanimous consent (with a quorum 
being present).
    The bill, H.R. 5946, as amended, was ordered favorably 
reported to the House of Representatives by a voice vote (with 
a quorum being present).

                     IV. BUDGET EFFECTS OF THE BILL

               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 5946, as 
reported.
    The bill, as reported, is estimated to have the following 
effect on Federal budget receipts for fiscal years 2017-2026:

                                                                      FISCAL YEARS
                                                                  [Millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
    2017         2018         2019         2020         2021         2022         2023         2024         2025         2026       2017-21     2017-26
--------------------------------------------------------------------------------------------------------------------------------------------------------
       -1          [1]          [1]          [1]           -1          [1]          [1]          [1]           -1          [1]           -2          -3
--------------------------------------------------------------------------------------------------------------------------------------------------------
NOTE: Details do not add to totals due to rounding.
[1] Loss of less than $500,000.

    Pursuant to clause 8 of rule XIII of the Rules of the House 
of Representatives, the following statement is made by the 
Joint Committee on Taxation with respect to the provisions of 
the bill amending the Internal Revenue Code of 1986: The gross 
budgetary effect (before incorporating macroeconomic effects) 
in any fiscal year is less than 0.25 percent of the current 
projected gross domestic product of the United States for that 
fiscal year; therefore, the bill is not ``major legislation'' 
for purposes of requiring that the estimate include the 
budgetary effects of changes in economic output, employment, 
capital stock and other macroeconomic variables.

B. Statement Regarding New Budget Authority and Tax Expenditures Budget 
                               Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee further states that the bill enlarges a tax 
expenditure.

      C. Cost Estimate Prepared by the Congressional Budget Office

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, requiring a cost estimate 
prepared by the CBO, the following statement by CBO is 
provided.

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 16, 2016.
Hon. Kevin Brady,
Chairman, Committee on Ways and Means,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5946, the United 
States Appreciation for Olympians and Paralympians Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Jacob Fabian.
            Sincerely,
                                                        Keith Hall.
    Enclosure.

H.R 5946--United States Appreciation for Olympians and Paralympians Act

    H.R. 5946 would amend the Internal Revenue Code to exclude 
from gross income, for income tax purposes, certain prizes or 
awards won in competition in the Olympic Games or the 
Paralympic Games. Starting on January 1, 2016, the exclusion 
would apply to monetary prizes received from the United States 
Olympic Committee and the intrinsic value of the medals 
awarded. The exclusion would not apply to individuals with 
adjusted gross income above $1 million, or half of that amount 
for married individuals filing a separate return.
    The staff of the Joint Committee on Taxation (JCT) 
estimates that enacting the bill would reduce revenues, thus 
increasing federal budget deficits, by about $3 million over 
the 2017-2026 period. Specifically, JCT estimates that the bill 
would have no effect on revenues in 2016 and would reduce them 
by $1 million in 2017, 2021, and 2025, and by less than 
$500,000 in the other years of the 2017-2026 period.
    The Statutory Pay-As-You-Go Act of 2010 establishes budget-
reporting and enforcement procedures for legislation affecting 
direct spending and revenues. Enacting H.R. 5946 would reduce 
revenues; therefore, pay-as-you-go procedures apply. The 
estimated increases in the deficit are shown in the following 
table. Enacting the bill would not affect direct spending.
    JCT and CBO estimate that enacting the bill would not 
increase net direct spending in any of the four 10-year periods 
beginning in 2027, and would increase on-budget deficits over 
those periods by very small amounts.
    JCT has determined that H.R. 5946 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Jacob Fabian. 
The estimate was approved by John McClelland, Assistant 
Director for Tax Analysis.

         CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 5946, AS ORDERED REPORTED BY THE HOUSE COMMITTEE ON WAYS AND MEANS ON SEPTEMBER 14, 2016
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    By fiscal year, in millions of dollars--
                                                      --------------------------------------------------------------------------------------------------
                                                        2016   2017   2018   2019   2020   2021   2022   2023   2024   2025   2026  2016-2021  2016-2026
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               NET INCREASE IN THE DEFICIT
 
Statutory Pay-As-You-Go Effects......................      0      1      0      0      0      1      0      0      0      1      0         2          3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Staff of the Joint Committee on Taxation.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE

          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives (relating to oversight findings), 
the Committee advises that it was as a result of the 
Committee's review of the provisions of H.R. 5946 that the 
Committee concluded that it is appropriate to report the bill, 
as amended, favorably to the House of Representatives with the 
recommendation that the bill do pass.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill contains no measure that authorizes funding, so no 
statement of general performance goals and objectives for which 
any measure authorizes funding is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
further determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

                D. Applicability of House Rule XXI 5(b)

    Rule XXI 5(b) of the Rules of the House of Representatives 
provides, in part, that ``A bill or joint resolution, 
amendment, or conference report carrying a Federal income tax 
rate increase may not be considered as passed or agreed to 
unless so determined by a vote of not less than three-fifths of 
the Members voting, a quorum being present.'' The Committee has 
carefully reviewed the bill, and states that the bill does not 
involve any Federal income tax rate increases within the 
meaning of the rule.

                       E. Tax Complexity Analysis

    The following statement is made pursuant to clause 3(h)(1) 
of rule XIII of the Rules of the House of Representatives. 
Section 4022(b) of the Internal Revenue Service Restructuring 
and Reform Act of 1998 (``IRS Reform Act'') requires the staff 
of the Joint Committee on Taxation (in consultation with the 
Internal Revenue Service and the Treasury Department) to 
provide a tax complexity analysis. The complexity analysis is 
required for all legislation reported by the Senate Committee 
on Finance, the House Committee on Ways and Means, or any 
committee of conference if the legislation includes a provision 
that directly or indirectly amends the Internal Revenue Code of 
1986 and has widespread applicability to individuals or small 
businesses.
    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

  F. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                   G. Duplication of Federal Programs

    In compliance with Sec. 3(g)(2) of H. Res. 5 (114th 
Congress), the Committee states that no provision of the bill 
establishes or reauthorizes: (1) a program of the Federal 
Government known to be duplicative of another Federal program, 
(2) a program included in any report from the Government 
Accountability Office to Congress pursuant to section 21 of 
Public Law 111-139, or (3) a program related to a program 
identified in the most recent Catalog of Federal Domestic 
Assistance, published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169).

                 H. Disclosure of Directed Rule Makings

    In compliance with Sec. 3(i) of H. Res. 5 (114th Congress), 
the following statement is made concerning directed rule 
makings: The Committee estimates that the bill requires no 
directed rule makings within the meaning of such section.

       VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

  A. Text of Existing Law Amended or Repealed by the Bill, as Reported

    In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

   TEXT OF EXISTING LAW AMENDED OR REPEALED BY THE BILL, AS REPORTED

  In compliance with clause 3(e)(1)(A) of rule XIII of the 
Rules of the House of Representatives, the text of each section 
proposed to be amended or repealed by the bill, as reported, is 
shown below:

                     INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *

CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *

Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *

PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *

SEC. 74. PRIZES AND AWARDS.

  (a) General Rule.--Except as otherwise provided in this 
section or in section 117(relating to qualified scholarships), 
gross income includes amounts received as prizes and awards.
  (b) Exception for Certain Prizes and Awards Transferred to 
Charities.--Gross income does not include amounts received as 
prizes and awards made primarily in recognition of religious, 
charitable, scientific, educational, artistic, literary, or 
civic achievement, but only if--
          (1) the recipient was selected without any action on 
        his part to enter the contest or proceeding;
          (2) the recipient is not required to render 
        substantial future services as a condition to receiving 
        the prize or award; and
          (3) the prize or award is transferred by the payor to 
        a governmental unit or organization described in 
        paragraph (1) or (2) of section 170(c) pursuant to a 
        designation made by the recipient.
  (c) Exception for Certain Employee Achievement Awards.--
          (1) In general.--Gross income shall not include the 
        value of an employee achievement award (as defined in 
        section 274(j)) received by the taxpayer if the cost to 
        the employer of the employee achievement award does not 
        exceed the amount allowable as a deduction to the 
        employer for the cost of the employee achievement 
        award.
          (2) Excess deduction award.--
    If the cost to the employer of the employee achievement 
award received by the taxpayer exceeds the amount allowable as 
a deduction to the employer, then gross income includes the 
greater of--
                  (A) an amount equal to the portion of the 
                cost to the employer of the award that is not 
                allowable as a deduction to the employer (but 
                not in excess of the value of the award), or
                  (B) the amount by which the value of the 
                award exceeds the amount allowable as a 
                deduction to the employer.
        The remaining portion of the value of such award shall 
        not be included in the gross income of the recipient.
          (3) Treatment of tax-exempt employers.--In the case 
        of an employer exempt from taxation under this 
        subtitle, any reference in this subsection to the 
        amount allowable as a deduction to the employer shall 
        be treated as a reference to the amount which would be 
        allowable as a deduction to the employer if the 
        employer were not exempt from taxation under this 
        subtitle.
          (4) Cross reference.--For provisions excluding 
        certain de minimis fringes from gross income, see 
        section 132(e).

           *       *       *       *       *       *       *

      B. Changes in Existing Law Proposed by the Bill, as Reported

    In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
proposed by the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italics, existing law in 
which no change is proposed is shown in roman):

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e)(1)(B) of rule XIII of the 
Rules of the House of Representatives, changes in existing law 
made by the bill, as reported, are shown as follows (new matter 
is printed in italics and existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986

           *       *       *       *       *       *       *
Subtitle A--Income Taxes

           *       *       *       *       *       *       *

CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *

Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *

PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *

SEC. 74. PRIZES AND AWARDS.

  (a) General Rule.--Except as otherwise provided in this 
section or in section 117(relating to qualified scholarships), 
gross income includes amounts received as prizes and awards.
  (b) Exception for Certain Prizes and Awards Transferred to 
Charities.--Gross income does not include amounts received as 
prizes and awards made primarily in recognition of religious, 
charitable, scientific, educational, artistic, literary, or 
civic achievement, but only if--
          (1) the recipient was selected without any action on 
        his part to enter the contest or proceeding;
          (2) the recipient is not required to render 
        substantial future services as a condition to receiving 
        the prize or award; and
          (3) the prize or award is transferred by the payor to 
        a governmental unit or organization described in 
        paragraph (1) or (2) of section 170(c) pursuant to a 
        designation made by the recipient.
  (c) Exception for Certain Employee Achievement Awards.--
          (1) In general.--Gross income shall not include the 
        value of an employee achievement award (as defined in 
        section 274(j)) received by the taxpayer if the cost to 
        the employer of the employee achievement award does not 
        exceed the amount allowable as a deduction to the 
        employer for the cost of the employee achievement 
        award.
          (2) Excess deduction award.--If the cost to the 
        employer of the employee achievement award received by 
        the taxpayer exceeds the amount allowable as a 
        deduction to the employer, then gross income includes 
        the greater of--
                  (A) an amount equal to the portion of the 
                cost to the employer of the award that is not 
                allowable as a deduction to the employer (but 
                not in excess of the value of the award), or
                  (B) the amount by which the value of the 
                award exceeds the amount allowable as a 
                deduction to the employer.
        The remaining portion of the value of such award shall 
        not be included in the gross income of the recipient.
          (3) Treatment of tax-exempt employers.--In the case 
        of an employer exempt from taxation under this 
        subtitle, any reference in this subsection to the 
        amount allowable as a deduction to the employer shall 
        be treated as a reference to the amount which would be 
        allowable as a deduction to the employer if the 
        employer were not exempt from taxation under this 
        subtitle.
          (4) Cross reference.--For provisions excluding 
        certain de minimis fringes from gross income, see 
        section 132(e).
  (d) Exception for Olympic and Paralympic Medals and Prizes.--
          (1) In general.--Gross income shall not include the 
        value of any medal awarded in, or any prize money 
        received from the United States Olympic Committee on 
        account of, competition in the Olympic Games or 
        Paralympic Games.
          (2) Limitation based on adjusted gross income.--
                  (A) In general.--Paragraph (1) shall not 
                apply to any taxpayer for any taxable year if 
                the adjusted gross income (determined without 
                regard to this subsection) of such taxpayer for 
                such taxable year exceeds $1,000,000 (half of 
                such amount in the case of a married individual 
                filing a separate return).
                  (B) Coordination with other limitations.--For 
                purposes of sections 86, 135, 137, 199, 219, 
                221, 222, and 469, adjusted gross income shall 
                be determined after the application of 
                paragraph (1) and before the application of 
                subparagraph (A).

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