II 

108TH CONGRESS 

1ST SESSION S. 19

To amend the Internal Revenue Code of 1986 and titles 10 and 38, United 

States Code, to improve benefits for members of the uniformed services 

and for veterans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 7, 2003

Mr. DASCHLE (for himself, Mr. AKAKA, Mr. BAUCUS, Mr. BIDEN, Mr. 

BREAUX, Ms. CANTWELL, Mrs. CLINTON, Mr. CORZINE, Mr. DAYTON, 

Mr. DORGAN, Mr. DURBIN, Mr. HOLLINGS, Mr. JEFFORDS, Mr. JOHNSON, Mr. KENNEDY, Mr. KERRY, Mr. LEAHY, Mr. LEVIN, Mrs. MURRAY, 

Mr. REID, Mr. ROCKEFELLER, Mr. SARBANES, Mr. SCHUMER, and Ms. 

STABENOW) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 and titles 

10 and 38, United States Code, to improve benefits 

for members of the uniformed services and for veterans, 

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; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Veterans and Military Personnel Fairness Act of 2003’’. 
2

•S 19 IS 

1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows:

Sec. 1. Short title; table of contents. 

TITLE I—BENEFITS AND BENEFITS ADMINISTRATION 

Subtitle A—Compensation 

Sec. 101. Effective date of authority for concurrent receipt of military retired 

pay and veterans’ disability compensation. 

Subtitle B—Health Care 

Sec. 111. Guaranteed adequate funding for veterans health care. 

Sec. 112. Authority of Department of Veterans Affairs pharmacies to dispense 

medications to veterans on prescriptions written by private 

practitioners. 

TITLE II—ARMED FORCES TAX FAIRNESS 

Sec. 201. Short title; etc. 

Subtitle A—Improving Tax Equity for Military Personnel 

Sec. 211. Exclusion from gross income of certain death gratuity payments. 

Sec. 212. Exclusion of gain from sale of a principal residence by a member of 

the uniformed services or the foreign service. 

Sec. 213. Exclusion for amounts received under Department of Defense homeowners assistance program. 

Sec. 214. Expansion of combat zone filing rules to contingency operations. 

Sec. 215. Above-the-line deduction for overnight travel expenses of National 

Guard and Reserve members. 

Sec. 216. Modification of membership requirement for exemption from tax for 

certain veterans’ organizations. 

Sec. 217. Clarification of the treatment of certain dependent care assistance 

programs. 

Subtitle B—Other Provisions 

Sec. 221. Revision of tax rules on expatriation. 

Sec. 222. Extension of Internal Revenue Service user fees. 

Sec. 223. Partial payment of tax liability in installment agreements.
3

•S 19 IS 

1 TITLE I—BENEFITS AND 

2 BENEFITS ADMINISTRATION 

3 Subtitle A—Compensation 

4 SEC. 101. EFFECTIVE DATE OF AUTHORITY FOR CONCUR5 RENT RECEIPT OF MILITARY RETIRED PAY 

6 AND VETERANS’ DISABILITY COMPENSATION. 

7 (a) REPEAL OF CONTINGENT EFFECTIVE DATE.—

8 Section 1414 of title 10, United States Code, is amend9 ed—

10 (1) in subsection (a), by striking ‘‘, subject to 

11 the enactment of qualifying offsetting legislation as 

12 specified in subsection (f)’’; and 

13 (2) by striking subsections (e) and (f). 

14 (b) SUBSTITUTION OF EFFECTIVE DATE.—Section 

15 1414 of title 10, United States Code, shall apply with re16 spect to months beginning on or after October 1, 2003. 

17 (c) PROHIBITION OF RETROACTIVE BENEFITS.—(1) 

18 No benefit may be paid to any person by reason of section 

19 1414 of title 10, United States Code, for any period before 

20 the date specified in subsection (b). 

21 (2) Section 641 of the National Defense Authoriza22 tion Act for Fiscal Year 2002 (Public Law 107–107; 115 

23 Stat. 1149) is amended by striking subsection (d). 

24 (d) CONFORMING TERMINATION OF SPECIAL COM25 PENSATION PROGRAMS.—(1) Effective on the date speci-
4

•S 19 IS 

1 fied in subsection (b), sections 1413 and 1413a of title 

2 10, United States Code, are repealed. 

3 (2) Section 1413 of title 10, United States Code, is 

4 amended—

5 (A) in subsection (a), by striking the second 

6 sentence; and 

7 (B) in subsection (b), by striking paragraph 

8 (3). 

9 Subtitle B—Health Care 

10 SEC. 111. GUARANTEED ADEQUATE FUNDING FOR VET11 ERANS HEALTH CARE. 

12 (a) IN GENERAL.—Chapter 1 of title 38, United 

13 States Code, is amended by adding at the end the fol14 lowing new section: 

15 ‘‘§ 117. Guaranteed funding for veterans health care 

16 ‘‘(a) For each fiscal year, the Secretary of the Treas17 ury shall make available to the Secretary of Veterans Af18 fairs the amount determined under subsection (b) with re19 spect to that fiscal year. Each such amount is available, 

20 without fiscal year limitation, for the programs, functions, 

21 and activities of the Veterans Health Administration, as 

22 specified in subsection (c). 

23 ‘‘(b)(1) The amount applicable to fiscal year 2005 

24 under this subsection is the amount equal to 120 percent 
5

•S 19 IS 

1 of the amount obligated by the Department during fiscal 

2 year 2003 for the purposes specified in subsection (c). 

3 ‘‘(2) The amount applicable to any fiscal year after 

4 fiscal year 2005 under this subsection is the amount equal 

5 to the product of the following: 

6 ‘‘(A) The sum of—

7 ‘‘(i) the number of veterans enrolled in the 

8 Department health care system under section 

9 1705 of this title as of July 1 preceding the be10 ginning of such fiscal year; and 

11 ‘‘(ii) the number of persons eligible for 

12 health care under chapter 17 of this title who 

13 are not covered by clause (i) and who were pro14 vided hospital care or medical services under 

15 such chapter at any time during the fiscal year 

16 preceding such fiscal year. 

17 ‘‘(B) The per capita baseline amount, as in18 creased from time to time pursuant to paragraph 

19 (3)(B). 

20 ‘‘(3)(A) For purposes of paragraph (2)(B), the term 

21 ‘per capita baseline amount’ means the amount equal to—

22 ‘‘(i) the amount specified in paragraph (1), di23 vided by 
6

•S 19 IS 

1 ‘‘(ii) the number of veterans enrolled in the De2 partment health care system under section 1705 of 

3 this title as of September 30, 2003. 

4 ‘‘(B) With respect to any fiscal year, the Secretary 

5 shall provide a percentage increase (rounded to the near6 est dollar) in the per capita baseline amount equal to the 

7 percentage by which—

8 ‘‘(i) the Consumer Price Index (all Urban Con9 sumers, United States city Average, Medical Care, 

10 Not Seasonally Adjusted), published by the Bureau

11 of Labor Statistics of the Department of Labor for 

12 the 12-month period ending on the June 30 pre13 ceding the beginning of the fiscal year for which the 

14 increase is made, exceeds 

15 ‘‘(ii) such Consumer Price Index for the 12-

16 month period preceding the 12-month period de17 scribed in clause (i). 

18 ‘‘(c)(1) Except as provided in paragraph (2), the pur19 poses for which amounts made available pursuant to sub20 section (a) shall be all programs, functions, and activities 

21 of the Veterans Health Administration. 

22 ‘‘(2) Amounts made available pursuant to subsection 

23 (a) are not available for grants under subchapter III of 

24 chapter 81 of this title.’’. 
7

•S 19 IS 

1 (b) REPEAL OF CONSTRUCTION AUTHORIZATION RE2 QUIREMENT.—Section 8104 of title 38, United States 

3 Code, is amended to read as follows: 

4 ‘‘§ 8104. Additional authorities and limitations 

5 ‘‘(a) The Secretary may accept gifts or donations for 

6 any of the purposes of this subchapter. 

7 ‘‘(b)(1) The Secretary may not obligate funds in an 

8 amount in excess of $500,000 from the Advance Planning 

9 Fund of the Department toward the design or develop10 ment of a major medical facility project until—

11 ‘‘(A) the Secretary submits to the committees a 

12 report on the proposed obligation; and 

13 ‘‘(B) a period of 30 days has passed after the 

14 date on which the report is received by the commit15 tees. 

16 ‘‘(2) In this subsection, the term ‘major medical facil17 ity project’ means a project for the construction, alter18 ation, or acquisition of a medical facility involving a total 

19 expenditure of more than $4,000,000, but such term does 

20 not include an acquisition by exchange.’’. 

21 (c) CLERICAL AMENDMENTS.—(1) The table of sec22 tions at the beginning of chapter 1 of title 38, United 

23 States Code, is amended by adding at the end the fol24 lowing new item:

‘‘117. Guaranteed funding for veterans health care.’’.
8

•S 19 IS 

1 (2) The table of sections at the beginning of chapter 

2 81 of such title is amended by striking the item relating 

3 to section 8104 and inserting the following new item:

‘‘8104. Additional authorities and limitations.’’.

4 (d) EFFECTIVE DATES.—(1) The amendments made 

5 by subsections (a) and (c)(1) shall take effect on the date 

6 of the enactment of this Act. 

7 (2) The amendments made by subsections (b) and 

8 (c)(2) shall take effect on October 1, 2004. 

9 SEC. 112. AUTHORITY OF DEPARTMENT OF VETERANS AF10 FAIRS PHARMACIES TO DISPENSE MEDICA11 TIONS TO VETERANS ON PRESCRIPTIONS 

12 WRITTEN BY PRIVATE PRACTITIONERS. 

13 (a) AUTHORITY.—Section 1712(d) of title 38, United 

14 States Code, is amended—

15 (1) by inserting ‘‘(1)’’ after ‘‘(d)’’; and 

16 (2) by adding at the end the following: 

17 ‘‘(2) In addition to drugs and medicines furnished 

18 pursuant to paragraph (1), the Secretary shall furnish to 

19 a veteran enrolled under section 1705 of this title such 

20 drugs and medicines on the formulary of the Department 

21 as may be ordered on prescription of a duly licensed physi22 cian in the treatment of any illness or injury of the vet23 eran. Any such prescription is subject to section 1722A 

24 of this title.’’. 
9

•S 19 IS 

1 (b) CLERICAL AMENDMENTS.—(1) The heading of 

2 section 1712 of such title is amended to read as follows: 

3 ‘‘§ 1712. Dental care; drugs and medicines; vaccines’’. 

4 (2) The table of sections at the beginning of chapter 

5 17 of such title is amended by striking the item relating 

6 to section 1712 and inserting the following new item:

‘‘1712. Dental care; drugs and medicines; vaccines.’’.

7 TITLE II—ARMED FORCES TAX 

8 FAIRNESS 

9 SEC. 201. SHORT TITLE; ETC. 

10 (a) SHORT TITLE.—This title may be cited as the 

11 ‘‘Armed Forces Tax Fairness Act of 2003’’. 

12 (b) AMENDMENT OF 1986 CODE.—Except as other13 wise expressly provided, whenever in this title an amend14 ment or repeal is expressed in terms of an amendment 

15 to, or repeal of, a section or other provision, the reference 

16 shall be considered to be made to a section or other provi17 sion of the Internal Revenue Code of 1986. 

18 Subtitle A—Improving Tax Equity 

19 for Military Personnel 

20 SEC. 211. EXCLUSION FROM GROSS INCOME OF CERTAIN 

21 DEATH GRATUITY PAYMENTS. 

22 (a) IN GENERAL.—Subsection (b)(3) of section 134 

23 (relating to certain military benefits) is amended by add24 ing at the end the following new subparagraph: 
10

•S 19 IS 

1 ‘‘(C) EXCEPTION FOR DEATH GRATUITY

2 ADJUSTMENTS MADE BY LAW.—Subparagraph 

3 (A) shall not apply to any adjustment to the 

4 amount of death gratuity payable under chapter 

5 75 of title 10, United States Code, which is 

6 pursuant to a provision of law enacted after 

7 September 9, 1986.’’. 

8 (b) CONFORMING AMENDMENT.—Subparagraph (A) 

9 of section 134(b)(3) is amended by striking ‘‘subpara10 graph (B)’’ and inserting ‘‘subparagraphs (B) and (C)’’. 

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

12 this section shall apply with respect to deaths occurring 

13 after September 10, 2001. 

14 SEC. 212. EXCLUSION OF GAIN FROM SALE OF A PRINCIPAL 

15 RESIDENCE BY A MEMBER OF THE UNI16 FORMED SERVICES OR THE FOREIGN SERV17 ICE. 

18 (a) IN GENERAL.—Subsection (d) of section 121 (re19 lating to exclusion of gain from sale of principal residence) 

20 is amended by adding at the end the following new para21 graph: 

22 ‘‘(9) MEMBERS OF UNIFORMED SERVICES AND

23 FOREIGN SERVICE.—

24 ‘‘(A) IN GENERAL.—At the election of an 

25 individual with respect to a property, the run-
11

•S 19 IS 

1 ning of the 5-year period described in sub2 section (a) with respect to such property shall 

3 be suspended during any period that such indi4 vidual or such individual’s spouse is serving on 

5 qualified official extended duty as a member of 

6 the uniformed services or of the Foreign Service 

7 of the United States.

8 ‘‘(B) MAXIMUM PERIOD OF SUSPENSION.—

9 The 5-year period described in subsection (a) 

10 shall not be extended more than 10 years by 

11 reason of subparagraph (A). 

12 ‘‘(C) QUALIFIED OFFICIAL EXTENDED

13 DUTY.—For purposes of this paragraph— 

14 ‘‘(i) IN GENERAL.—The term ‘quali15 fied official extended duty’ means any ex16 tended duty while serving at a duty station 

17 which is at least 50 miles from such prop18 erty or while residing under Government 

19 orders in Government quarters. 

20 ‘‘(ii) UNIFORMED SERVICES.—The 

21 term ‘uniformed services’ has the meaning 

22 given such term by section 101(a)(5) of 

23 title 10, United States Code, as in effect 

24 on the date of the enactment of this para25 graph. 
12

•S 19 IS 

1 ‘‘(iii) FOREIGN SERVICE OF THE

2 UNITED STATES.—The term ‘member of 

3 the Foreign Service of the United States’ 

4 has the meaning given the term ‘member 

5 of the Service’ by paragraph (1), (2), (3), 

6 (4), or (5) of section 103 of the Foreign 

7 Service Act of 1980. 

8 ‘‘(iv) EXTENDED DUTY.—The term 

9 ‘extended duty’ means any period of duty 

10 pursuant to a call or order to such duty for 

11 a period in excess of 90 days or for an in12 definite period. 

13 ‘‘(D) SPECIAL RULES RELATING TO ELEC14 TION.—

15 ‘‘(i) ELECTION LIMITED TO 1 PROP16 ERTY AT A TIME.—An election under sub17 paragraph (A) with respect to any property 

18 may not be made if such an election is in 

19 effect with respect to any other property. 

20 ‘‘(ii) REVOCATION OF ELECTION.—An 

21 election under subparagraph (A) may be 

22 revoked at any time.’’. 

23 (b) EFFECTIVE DATE; SPECIAL RULE.—

24 (1) EFFECTIVE DATE.—The amendment made 

25 by this section shall take effect as if included in the 
13

•S 19 IS 

1 amendments made by section 312 of the Taxpayer 

2 Relief Act of 1997. 

3 (2) WAIVER OF LIMITATIONS.—If refund or 

4 credit of any overpayment of tax resulting from the 

5 amendment made by this section is prevented at any 

6 time before the close of the 1-year period beginning 

7 on the date of the enactment of this Act by the oper8 ation of any law or rule of law (including res judi9 cata), such refund or credit may nevertheless be 

10 made or allowed if claim therefor is filed before the 

11 close of such period. 

12 SEC. 213. EXCLUSION FOR AMOUNTS RECEIVED UNDER DE13 PARTMENT OF DEFENSE HOMEOWNERS AS14 SISTANCE PROGRAM. 

15 (a) IN GENERAL.—Section 132(a) (relating to the ex16 clusion from gross income of certain fringe benefits) is 

17 amended by striking ‘‘or’’ at the end of paragraph (6), 

18 by striking the period at the end of paragraph (7) and 

19 inserting ‘‘, or’’ and by adding at the end the following 

20 new paragraph: 

21 ‘‘(8) qualified military base realignment and 

22 closure fringe.’’. 

23 (b) QUALIFIED MILITARY BASE REALIGNMENT AND

24 CLOSURE FRINGE.—Section 132 is amended by redesig-
14

•S 19 IS 

1 nating subsection (n) as subsection (o) and by inserting 

2 after subsection (m) the following new subsection: 

3 ‘‘(n) QUALIFIED MILITARY BASE REALIGNMENT AND

4 CLOSURE FRINGE.—For purposes of this section, the 

5 term ‘qualified military base realignment and closure 

6 fringe’ means 1 or more payments under the authority of 

7 section 1013 of the Demonstration Cities and Metropoli8 tan Development Act of 1966 (42 U.S.C. 3374) to offset 

9 the adverse effects on housing values as a result of a mili10 tary base realignment or closure.’’. 

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

12 this section shall apply to payments made after the date 

13 of the enactment of this Act. 

14 SEC. 214. EXPANSION OF COMBAT ZONE FILING RULES TO 

15 CONTINGENCY OPERATIONS. 

16 (a) IN GENERAL.—Section 7508(a) (relating to time 

17 for performing certain acts postponed by reason of service 

18 in combat zone) is amended—

19 (1) by inserting ‘‘or when deployed outside the 

20 United States away from the individual’s permanent 

21 duty station while participating in an operation des22 ignated by the Secretary of Defense as a contin23 gency operation (as defined in section 101(a)(13) of 

24 title 10, United States Code) or which became such 
15

•S 19 IS 

1 a contingency operation by operation of law’’ after 

2 ‘‘section 112’’, 

3 (2) by inserting in the first sentence ‘‘or at any 

4 time during the period of such contingency oper5 ation’’ after ‘‘for purposes of such section’’, 

6 (3) by inserting ‘‘or operation’’ after ‘‘such an 

7 area’’, and 

8 (4) by inserting ‘‘or operation’’ after ‘‘such 

9 area’’.

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 7508(d) is amended by inserting 

12 ‘‘or contingency operation’’ after ‘‘area’’. 

13 (2) The heading for section 7508 is amended by 

14 inserting ‘‘OR CONTINGENCY OPERATION’’ after 

15 ‘‘COMBAT ZONE’’. 

16 (3) The item relating to section 7508 in the 

17 table of sections for chapter 77 is amended by in18 serting ‘‘or contingency operation’’ after ‘‘combat 

19 zone’’. 

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

21 this section shall apply to any period for performing an 

22 act which has not expired before the date of the enactment 

23 of this Act. 
16

•S 19 IS 

1 SEC. 215. ABOVE-THE-LINE DEDUCTION FOR OVERNIGHT 

2 TRAVEL EXPENSES OF NATIONAL GUARD 

3 AND RESERVE MEMBERS. 

4 (a) DEDUCTION ALLOWED.—Section 162 (relating to 

5 certain trade or business expenses) is amended by redesig6 nating subsection (p) as subsection (q) and inserting after 

7 subsection (o) the following new subsection: 

8 ‘‘(p) TREATMENT OF EXPENSES OF MEMBERS OF

9 RESERVE COMPONENT OF ARMED FORCES OF THE

10 UNITED STATES.—For purposes of subsection (a)(2), in 

11 the case of an individual who performs services as a mem12 ber of a reserve component of the Armed Forces of the 

13 United States at any time during the taxable year, such 

14 individual shall be deemed to be away from home in the 

15 pursuit of a trade or business for any period during which 

16 such individual is away from home in connection with such 

17 service.’’. 

18 (b) DEDUCTION ALLOWED WHETHER OR NOT TAX19 PAYER ELECTS TO ITEMIZE.—Section 62(a)(2) (relating 

20 to certain trade and business deductions of employees) is 

21 amended by adding at the end the following new subpara22 graph: 

23 ‘‘(E) CERTAIN EXPENSES OF MEMBERS OF

24 RESERVE COMPONENTS OF THE ARMED FORCES

25 OF THE UNITED STATES.—The deductions al26 lowed by section 162 which consist of expenses, 
17

•S 19 IS 

1 in amounts not in excess of the rates for travel 

2 expenses (including per diem in lieu of subsist3 ence) authorized for employees of agencies 

4 under subchapter I of chapter 57 of title 5, 

5 United States Code, paid or incurred by the 

6 taxpayer in connection with the performance of 

7 services by such taxpayer as a member of a re8 serve component of the Armed Forces of the 

9 United States.’’. 

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

11 this section shall apply to amounts paid or incurred in tax12 able years beginning after December 31, 2002. 

13 SEC. 216. MODIFICATION OF MEMBERSHIP REQUIREMENT 

14 FOR EXEMPTION FROM TAX FOR CERTAIN 

15 VETERANS’ ORGANIZATIONS. 

16 (a) IN GENERAL.—Subparagraph (B) of section 

17 501(c)(19) (relating to list of exempt organizations) is 

18 amended by striking ‘‘or widowers’’ and inserting ‘‘, wid19 owers, or ancestors or lineal descendants’’. 

20 (b) EFFECTIVE DATE.—The amendments made by 

21 this section shall apply to taxable years beginning after 

22 the date of the enactment of this Act. 
18

•S 19 IS 

1 SEC. 217. CLARIFICATION OF THE TREATMENT OF CERTAIN 

2 DEPENDENT CARE ASSISTANCE PROGRAMS. 

3 (a) IN GENERAL.—Section 134(b) (defining qualified 

4 military benefit) is amended by adding at the end the fol5 lowing new paragraph: 

6 ‘‘(4) CLARIFICATION OF CERTAIN BENEFITS.—

7 For purposes of paragraph (1), such term includes 

8 any dependent care assistance program for any indi9 vidual described in paragraph (1)(A).’’. 

10 (b) CONFORMING AMENDMENTS.—

11 (1) Section 134(b)(3)(A) is amended by insert12 ing ‘‘and paragraph (4)’’ after ‘‘subparagraph (B)’’.

13 (2) Section 3121(a)(18) is amended by striking 

14 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’. 

15 (3) Section 3306(b)(13) is amended by striking 

16 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’. 

17 (4) Section 3401(a)(18) is amended by striking 

18 ‘‘or 129’’ and inserting ‘‘, 129, or 134(b)(4)’’. 

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

20 this section shall apply to taxable years beginning after 

21 December 31, 2002. 

22 (d) NO INFERENCE.—No inference may be drawn 

23 from the amendments made by this section with respect 

24 to the tax treatment of any amounts under the program 

25 described in section 134(b)(4) of the Internal Revenue 
19

•S 19 IS 

1 Code of 1986 (as added by this section) for any taxable 

2 year beginning before January 1, 2003. 

3 Subtitle B—Other Provisions 

4 SEC. 221. REVISION OF TAX RULES ON EXPATRIATION. 

5 (a) IN GENERAL.—Subpart A of part II of sub6 chapter N of chapter 1 is amended by inserting after sec7 tion 877 the following new section: 

8 ‘‘SEC. 877A. TAX RESPONSIBILITIES OF EXPATRIATION. 

9 ‘‘(a) GENERAL RULES.—For purposes of this sub10 title—

11 ‘‘(1) MARK TO MARKET.—Except as provided in 

12 subsections (d) and (f), all property of a covered ex13 patriate to whom this section applies shall be treated 

14 as sold on the day before the expatriation date for 

15 its fair market value. 

16 ‘‘(2) RECOGNITION OF GAIN OR LOSS.—In the 

17 case of any sale under paragraph (1)— 

18 ‘‘(A) notwithstanding any other provision 

19 of this title, any gain arising from such sale 

20 shall be taken into account for the taxable year 

21 of the sale, and 

22 ‘‘(B) any loss arising from such sale shall 

23 be taken into account for the taxable year of 

24 the sale to the extent otherwise provided by this 
20

•S 19 IS 

1 title, except that section 1091 shall not apply to 

2 any such loss. 

3 Proper adjustment shall be made in the amount of 

4 any gain or loss subsequently realized for gain or 

5 loss taken into account under the preceding sen6 tence. 

7 ‘‘(3) EXCLUSION FOR CERTAIN GAIN.—

8 ‘‘(A) IN GENERAL.—The amount which, 

9 but for this paragraph, would be includible in 

10 the gross income of any individual by reason of 

11 this section shall be reduced (but not below 

12 zero) by $600,000. For purposes of this para13 graph, allocable expatriation gain taken into ac14 count under subsection (f)(2) shall be treated 

15 in the same manner as an amount required to 

16 be includible in gross income. 

17 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—

18 ‘‘(i) IN GENERAL.—In the case of an 

19 expatriation date occurring in any calendar 

20 year after 2003, the $600,000 amount 

21 under subparagraph (A) shall be increased 

22 by an amount equal to—

23 ‘‘(I) such dollar amount, multi24 plied by 
21

•S 19 IS 

1 ‘‘(II) the cost-of-living adjust2 ment determined under section 1(f)(3) 

3 for such calendar year, determined by 

4 substituting ‘calendar year 2002’ for 

5 ‘calendar year 1992’ in subparagraph 

6 (B) thereof. 

7 ‘‘(ii) ROUNDING RULES.—If any 

8 amount after adjustment under clause (i) 

9 is not a multiple of $1,000, such amount 

10 shall be rounded to the next lower multiple 

11 of $1,000. 

12 ‘‘(4) ELECTION TO CONTINUE TO BE TAXED AS

13 UNITED STATES CITIZEN.—

14 ‘‘(A) IN GENERAL.—If a covered expatriate 

15 elects the application of this paragraph—

16 ‘‘(i) this section (other than this para17 graph and subsection (i)) shall not apply to 

18 the expatriate, but 

19 ‘‘(ii) in the case of property to which 

20 this section would apply but for such elec21 tion, the expatriate shall be subject to tax 

22 under this title in the same manner as if 

23 the individual were a United States citizen. 
22

•S 19 IS 

1 ‘‘(B) REQUIREMENTS.—Subparagraph (A) 

2 shall not apply to an individual unless the indi3 vidual—

4 ‘‘(i) provides security for payment of 

5 tax in such form and manner, and in such 

6 amount, as the Secretary may require, 

7 ‘‘(ii) consents to the waiver of any 

8 right of the individual under any treaty of 

9 the United States which would preclude as10 sessment or collection of any tax which 

11 may be imposed by reason of this para12 graph, and 

13 ‘‘(iii) complies with such other re14 quirements as the Secretary may prescribe. 

15 ‘‘(C) ELECTION.—An election under sub16 paragraph (A) shall apply to all property to 

17 which this section would apply but for the elec18 tion and, once made, shall be irrevocable. Such 

19 election shall also apply to property the basis of 

20 which is determined in whole or in part by ref21 erence to the property with respect to which the 

22 election was made. 

23 ‘‘(b) ELECTION TO DEFER TAX.—

24 ‘‘(1) IN GENERAL.—If the taxpayer elects the 

25 application of this subsection with respect to any 
23

•S 19 IS 

1 property treated as sold by reason of subsection (a), 

2 the payment of the additional tax attributable to 

3 such property shall be postponed until the due date 

4 of the return for the taxable year in which such 

5 property is disposed of (or, in the case of property 

6 disposed of in a transaction in which gain is not rec7 ognized in whole or in part, until such other date as 

8 the Secretary may prescribe). 

9 ‘‘(2) DETERMINATION OF TAX WITH RESPECT

10 TO PROPERTY.—For purposes of paragraph (1), the 

11 additional tax attributable to any property is an 

12 amount which bears the same ratio to the additional 

13 tax imposed by this chapter for the taxable year 

14 solely by reason of subsection (a) as the gain taken 

15 into account under subsection (a) with respect to 

16 such property bears to the total gain taken into ac17 count under subsection (a) with respect to all prop18 erty to which subsection (a) applies. 

19 ‘‘(3) TERMINATION OF POSTPONEMENT.—No 

20 tax may be postponed under this subsection later 

21 than the due date for the return of tax imposed by 

22 this chapter for the taxable year which includes the 

23 date of death of the expatriate (or, if earlier, the 

24 time that the security provided with respect to the 

25 property fails to meet the requirements of paragraph 
24

•S 19 IS 

1 (4), unless the taxpayer corrects such failure within 

2 the time specified by the Secretary). 

3 ‘‘(4) SECURITY.—

4 ‘‘(A) IN GENERAL.—No election may be 

5 made under paragraph (1) with respect to any 

6 property unless adequate security is provided to 

7 the Secretary with respect to such property. 

8 ‘‘(B) ADEQUATE SECURITY.—For purposes 

9 of subparagraph (A), security with respect to 

10 any property shall be treated as adequate secu11 rity if—

12 ‘‘(i) it is a bond in an amount equal 

13 to the deferred tax amount under para14 graph (2) for the property, or 

15 ‘‘(ii) the taxpayer otherwise estab16 lishes to the satisfaction of the Secretary 

17 that the security is adequate. 

18 ‘‘(5) WAIVER OF CERTAIN RIGHTS.—No elec19 tion may be made under paragraph (1) unless the 

20 taxpayer consents to the waiver of any right under 

21 any treaty of the United States which would pre22 clude assessment or collection of any tax imposed by 

23 reason of this section. 

24 ‘‘(6) ELECTIONS.—An election under paragraph 

25 (1) shall only apply to property described in the elec-
25

•S 19 IS 

1 tion and, once made, is irrevocable. An election may 

2 be made under paragraph (1) with respect to an in3 terest in a trust with respect to which gain is re4 quired to be recognized under subsection (f)(1). 

5 ‘‘(7) INTEREST.—For purposes of section 

6 6601—

7 ‘‘(A) the last date for the payment of tax 

8 shall be determined without regard to the elec9 tion under this subsection, and 

10 ‘‘(B) section 6621(a)(2) shall be applied by 

11 substituting ‘5 percentage points’ for ‘3 per12 centage points’ in subparagraph (B) thereof. 

13 ‘‘(c) COVERED EXPATRIATE.—For purposes of this 

14 section—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (2), the term ‘covered expatriate’ means an 

17 expatriate. 

18 ‘‘(2) EXCEPTIONS.—An individual shall not be 

19 treated as a covered expatriate if—

20 ‘‘(A) the individual—

21 ‘‘(i) became at birth a citizen of the 

22 United States and a citizen of another 

23 country and, as of the expatriation date, 

24 continues to be a citizen of, and is taxed 

25 as a resident of, such other country, and 
26

•S 19 IS 

1 ‘‘(ii) has not been a resident of the 

2 United States (as defined in section 

3 7701(b)(1)(A)(ii)) during the 5 taxable 

4 years ending with the taxable year during 

5 which the expatriation date occurs, or 

6 ‘‘(B)(i) the individual’s relinquishment of 

7 United States citizenship occurs before such individual attains age 181 8 ⁄2, and 

9 ‘‘(ii) the individual has been a resident of 

10 the United States (as so defined) for not more 

11 than 5 taxable years before the date of relin12 quishment. 

13 ‘‘(d) EXEMPT PROPERTY; SPECIAL RULES FOR PEN14 SION PLANS.—

15 ‘‘(1) EXEMPT PROPERTY.—This section shall 

16 not apply to the following: 

17 ‘‘(A) UNITED STATES REAL PROPERTY IN18 TERESTS.—Any United States real property in19 terest (as defined in section 897(c)(1)), other 

20 than stock of a United States real property 

21 holding corporation which does not, on the day 

22 before the expatriation date, meet the require23 ments of section 897(c)(2). 

24 ‘‘(B) SPECIFIED PROPERTY.—Any prop25 erty or interest in property not described in 
27

•S 19 IS 

1 subparagraph (A) which the Secretary specifies 

2 in regulations. 

3 ‘‘(2) SPECIAL RULES FOR CERTAIN RETIRE4 MENT PLANS.—

5 ‘‘(A) IN GENERAL.—If a covered expatriate 

6 holds on the day before the expatriation date 

7 any interest in a retirement plan to which this 

8 paragraph applies—

9 ‘‘(i) such interest shall not be treated 

10 as sold for purposes of subsection (a)(1), 

11 but 

12 ‘‘(ii) an amount equal to the present 

13 value of the expatriate’s nonforfeitable ac14 crued benefit shall be treated as having 

15 been received by such individual on such 

16 date as a distribution under the plan. 

17 ‘‘(B) TREATMENT OF SUBSEQUENT DIS18 TRIBUTIONS.—In the case of any distribution 

19 on or after the expatriation date to or on behalf 

20 of the covered expatriate from a plan from 

21 which the expatriate was treated as receiving a 

22 distribution under subparagraph (A), the 

23 amount otherwise includible in gross income by 

24 reason of the subsequent distribution shall be 

25 reduced by the excess of the amount includible 
28

•S 19 IS 

1 in gross income under subparagraph (A) over 

2 any portion of such amount to which this sub3 paragraph previously applied. 

4 ‘‘(C) TREATMENT OF SUBSEQUENT DIS5 TRIBUTIONS BY PLAN.—For purposes of this 

6 title, a retirement plan to which this paragraph 

7 applies, and any person acting on the plan’s be8 half, shall treat any subsequent distribution de9 scribed in subparagraph (B) in the same man10 ner as such distribution would be treated with11 out regard to this paragraph. 

12 ‘‘(D) APPLICABLE PLANS.—This para13 graph shall apply to—

14 ‘‘(i) any qualified retirement plan (as 

15 defined in section 4974(c)), 

16 ‘‘(ii) an eligible deferred compensation 

17 plan (as defined in section 457(b)) of an 

18 eligible employer described in section 

19 457(e)(1)(A), and 

20 ‘‘(iii) to the extent provided in regula21 tions, any foreign pension plan or similar 

22 retirement arrangements or programs. 

23 ‘‘(e) DEFINITIONS.—For purposes of this section—

24 ‘‘(1) EXPATRIATE.—The term ‘expatriate’ 

25 means—
29

•S 19 IS 

1 ‘‘(A) any United States citizen who relin2 quishes citizenship, and 

3 ‘‘(B) any long-term resident of the United 

4 States who—

5 ‘‘(i) ceases to be a lawful permanent 

6 resident of the United States (within the 

7 meaning of section 7701(b)(6)), or 

8 ‘‘(ii) commences to be treated as a 

9 resident of a foreign country under the 

10 provisions of a tax treaty between the 

11 United States and the foreign country and 

12 who does not waive the benefits of such 

13 treaty applicable to residents of the foreign 

14 country. 

15 ‘‘(2) EXPATRIATION DATE.—The term ‘expa16 triation date’ means—

17 ‘‘(A) the date an individual relinquishes 

18 United States citizenship, or 

19 ‘‘(B) in the case of a long-term resident of 

20 the United States, the date of the event de21 scribed in clause (i) or (ii) of paragraph (1)(B). 

22 ‘‘(3) RELINQUISHMENT OF CITIZENSHIP.—A 

23 citizen shall be treated as relinquishing United 

24 States citizenship on the earliest of—
30

•S 19 IS 

1 ‘‘(A) the date the individual renounces 

2 such individual’s United States nationality be3 fore a diplomatic or consular officer of the 

4 United States pursuant to paragraph (5) of sec5 tion 349(a) of the Immigration and Nationality 

6 Act (8 U.S.C. 1481(a)(5)), 

7 ‘‘(B) the date the individual furnishes to 

8 the United States Department of State a signed 

9 statement of voluntary relinquishment of 

10 United States nationality confirming the per11 formance of an act of expatriation specified in 

12 paragraph (1), (2), (3), or (4) of section 349(a) 

13 of the Immigration and Nationality Act (8 

14 U.S.C. 1481(a)(1)–(4)), 

15 ‘‘(C) the date the United States Depart16 ment of State issues to the individual a certifi17 cate of loss of nationality, or 

18 ‘‘(D) the date a court of the United States 

19 cancels a naturalized citizen’s certificate of nat20 uralization. 

21 Subparagraph (A) or (B) shall not apply to any indi22 vidual unless the renunciation or voluntary relin23 quishment is subsequently approved by the issuance 

24 to the individual of a certificate of loss of nationality 

25 by the United States Department of State. 
31

•S 19 IS 

1 ‘‘(4) LONG-TERM RESIDENT.—The term ‘long2 term resident’ has the meaning given to such term 

3 by section 877(e)(2). 

4 ‘‘(f) SPECIAL RULES APPLICABLE TO BENE5 FICIARIES’ INTERESTS IN TRUST.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), if an individual is determined under para8 graph (3) to hold an interest in a trust on the day 

9 before the expatriation date—

10 ‘‘(A) the individual shall not be treated as 

11 having sold such interest, 

12 ‘‘(B) such interest shall be treated as a 

13 separate share in the trust, and 

14 ‘‘(C)(i) such separate share shall be treat15 ed as a separate trust consisting of the assets 

16 allocable to such share, 

17 ‘‘(ii) the separate trust shall be treated as 

18 having sold its assets on the day before the ex19 patriation date for their fair market value and 

20 as having distributed all of its assets to the in21 dividual as of such time, and 

22 ‘‘(iii) the individual shall be treated as hav23 ing recontributed the assets to the separate 

24 trust. 
32

•S 19 IS 

1 Subsection (a)(2) shall apply to any income, gain, or 

2 loss of the individual arising from a distribution de3 scribed in subparagraph (C)(ii). In determining the 

4 amount of such distribution, proper adjustments 

5 shall be made for liabilities of the trust allocable to 

6 an individual’s share in the trust. 

7 ‘‘(2) SPECIAL RULES FOR INTERESTS IN QUALI8 FIED TRUSTS.—

9 ‘‘(A) IN GENERAL.—If the trust interest 

10 described in paragraph (1) is an interest in a 

11 qualified trust—

12 ‘‘(i) paragraph (1) and subsection (a) 

13 shall not apply, and 

14 ‘‘(ii) in addition to any other tax im15 posed by this title, there is hereby imposed 

16 on each distribution with respect to such 

17 interest a tax in the amount determined 

18 under subparagraph (B). 

19 ‘‘(B) AMOUNT OF TAX.—The amount of 

20 tax under subparagraph (A)(ii) shall be equal to 

21 the lesser of—

22 ‘‘(i) the highest rate of tax imposed by 

23 section 1(e) for the taxable year which in24 cludes the day before the expatriation date, 
33

•S 19 IS 

1 multiplied by the amount of the distribu2 tion, or 

3 ‘‘(ii) the balance in the deferred tax 

4 account immediately before the distribution 

5 determined without regard to any increases 

6 under subparagraph (C)(ii) after the 30th 

7 day preceding the distribution. 

8 ‘‘(C) DEFERRED TAX ACCOUNT.—For pur9 poses of subparagraph (B)(ii)— 

10 ‘‘(i) OPENING BALANCE.—The open11 ing balance in a deferred tax account with 

12 respect to any trust interest is an amount

13 equal to the tax which would have been im14 posed on the allocable expatriation gain 

15 with respect to the trust interest if such 

16 gain had been included in gross income 

17 under subsection (a). 

18 ‘‘(ii) INCREASE FOR INTEREST.—The 

19 balance in the deferred tax account shall 

20 be increased by the amount of interest de21 termined (on the balance in the account at 

22 the time the interest accrues), for periods 

23 after the 90th day after the expatriation 

24 date, by using the rates and method appli25 cable under section 6621 for underpay-
34

•S 19 IS 

1 ments of tax for such periods, except that 

2 section 6621(a)(2) shall be applied by sub3 stituting ‘5 percentage points’ for ‘3 per4 centage points’ in subparagraph (B) there5 of. 

6 ‘‘(iii) DECREASE FOR TAXES PRE7 VIOUSLY PAID.—The balance in the tax de8 ferred account shall be reduced— 

9 ‘‘(I) by the amount of taxes im10 posed by subparagraph (A) on any 

11 distribution to the person holding the 

12 trust interest, and 

13 ‘‘(II) in the case of a person 

14 holding a nonvested interest, to the 

15 extent provided in regulations, by the 

16 amount of taxes imposed by subpara17 graph (A) on distributions from the 

18 trust with respect to nonvested inter19 ests not held by such person. 

20 ‘‘(D) ALLOCABLE EXPATRIATION GAIN.—

21 For purposes of this paragraph, the allocable 

22 expatriation gain with respect to any bene23 ficiary’s interest in a trust is the amount of 

24 gain which would be allocable to such bene25 ficiary’s vested and nonvested interests in the 
35

•S 19 IS 

1 trust if the beneficiary held directly all assets 

2 allocable to such interests. 

3 ‘‘(E) TAX DEDUCTED AND WITHHELD.—

4 ‘‘(i) IN GENERAL.—The tax imposed 

5 by subparagraph (A)(ii) shall be deducted 

6 and withheld by the trustees from the dis7 tribution to which it relates. 

8 ‘‘(ii) EXCEPTION WHERE FAILURE TO

9 WAIVE TREATY RIGHTS.—If an amount 

10 may not be deducted and withheld under 

11 clause (i) by reason of the distributee fail12 ing to waive any treaty right with respect 

13 to such distribution—

14 ‘‘(I) the tax imposed by subpara15 graph (A)(ii) shall be imposed on the 

16 trust and each trustee shall be person17 ally liable for the amount of such tax, 

18 and 

19 ‘‘(II) any other beneficiary of the 

20 trust shall be entitled to recover from 

21 the distributee the amount of such tax 

22 imposed on the other beneficiary. 

23 ‘‘(F) DISPOSITION.—If a trust ceases to be 

24 a qualified trust at any time, a covered expa25 triate disposes of an interest in a qualified 
36

•S 19 IS 

1 trust, or a covered expatriate holding an inter2 est in a qualified trust dies, then, in lieu of the 

3 tax imposed by subparagraph (A)(ii), there is 

4 hereby imposed a tax equal to the lesser of—

5 ‘‘(i) the tax determined under para6 graph (1) as if the day before the expatria7 tion date were the date of such cessation, 

8 disposition, or death, whichever is applica9 ble, or 

10 ‘‘(ii) the balance in the tax deferred 

11 account immediately before such date. 

12 Such tax shall be imposed on the trust and 

13 each trustee shall be personally liable for the 

14 amount of such tax and any other beneficiary 

15 of the trust shall be entitled to recover from the 

16 covered expatriate or the estate the amount of 

17 such tax imposed on the other beneficiary. 

18 ‘‘(G) DEFINITIONS AND SPECIAL RULES.—

19 For purposes of this paragraph—

20 ‘‘(i) QUALIFIED TRUST.—The term 

21 ‘qualified trust’ means a trust which is de22 scribed in section 7701(a)(30)(E). 

23 ‘‘(ii) VESTED INTEREST.—The term 

24 ‘vested interest’ means any interest which, 
37

•S 19 IS 

1 as of the day before the expatriation date, 

2 is vested in the beneficiary. 

3 ‘‘(iii) NONVESTED INTEREST.—The 

4 term ‘nonvested interest’ means, with re5 spect to any beneficiary, any interest in a 

6 trust which is not a vested interest. Such 

7 interest shall be determined by assuming 

8 the maximum exercise of discretion in 

9 favor of the beneficiary and the occurrence 

10 of all contingencies in favor of the bene11 ficiary. 

12 ‘‘(iv) ADJUSTMENTS.—The Secretary 

13 may provide for such adjustments to the 

14 bases of assets in a trust or a deferred tax 

15 account, and the timing of such adjust16 ments, in order to ensure that gain is 

17 taxed only once. 

18 ‘‘(v) COORDINATION WITH RETIRE19 MENT PLAN RULES.—This subsection shall 

20 not apply to an interest in a trust which 

21 is part of a retirement plan to which sub22 section (d)(2) applies. 

23 ‘‘(3) DETERMINATION OF BENEFICIARIES’ IN24 TEREST IN TRUST.—
38

•S 19 IS 

1 ‘‘(A) DETERMINATIONS UNDER PARA2 GRAPH (1).—For purposes of paragraph (1), a 

3 beneficiary’s interest in a trust shall be based 

4 upon all relevant facts and circumstances, in5 cluding the terms of the trust instrument and 

6 any letter of wishes or similar document, histor7 ical patterns of trust distributions, and the ex8 istence of and functions performed by a trust 

9 protector or any similar adviser. 

10 ‘‘(B) OTHER DETERMINATIONS.—For pur11 poses of this section—

12 ‘‘(i) CONSTRUCTIVE OWNERSHIP.—If 

13 a beneficiary of a trust is a corporation, 

14 partnership, trust, or estate, the share15 holders, partners, or beneficiaries shall be 

16 deemed to be the trust beneficiaries for 

17 purposes of this section. 

18 ‘‘(ii) TAXPAYER RETURN POSITION.—

19 A taxpayer shall clearly indicate on its in20 come tax return—

21 ‘‘(I) the methodology used to de22 termine that taxpayer’s trust interest 

23 under this section, and 

24 ‘‘(II) if the taxpayer knows (or 

25 has reason to know) that any other 
39

•S 19 IS 

1 beneficiary of such trust is using a 

2 different methodology to determine 

3 such beneficiary’s trust interest under 

4 this section. 

5 ‘‘(g) TERMINATION OF DEFERRALS, ETC.—In the 

6 case of any covered expatriate, notwithstanding any other 

7 provision of this title—

8 ‘‘(1) any period during which recognition of in9 come or gain is deferred shall terminate on the day 

10 before the expatriation date, and 

11 ‘‘(2) any extension of time for payment of tax 

12 shall cease to apply on the day before the expatria13 tion date and the unpaid portion of such tax shall 

14 be due and payable at the time and in the manner 

15 prescribed by the Secretary. 

16 ‘‘(h) IMPOSITION OF TENTATIVE TAX.—

17 ‘‘(1) IN GENERAL.—If an individual is required 

18 to include any amount in gross income under sub19 section (a) for any taxable year, there is hereby im20 posed, immediately before the expatriation date, a 

21 tax in an amount equal to the amount of tax which 

22 would be imposed if the taxable year were a short 

23 taxable year ending on the expatriation date. 
40

•S 19 IS 

1 ‘‘(2) DUE DATE.—The due date for any tax im2 posed by paragraph (1) shall be the 90th day after 

3 the expatriation date. 

4 ‘‘(3) TREATMENT OF TAX.—Any tax paid under 

5 paragraph (1) shall be treated as a payment of the 

6 tax imposed by this chapter for the taxable year to 

7 which subsection (a) applies. 

8 ‘‘(4) DEFERRAL OF TAX.—The provisions of 

9 subsection (b) shall apply to the tax imposed by this 

10 subsection to the extent attributable to gain includ11 ible in gross income by reason of this section. 

12 ‘‘(i) SPECIAL LIENS FOR DEFERRED TAX

13 AMOUNTS.—

14 ‘‘(1) IMPOSITION OF LIEN.—

15 ‘‘(A) IN GENERAL.—If a covered expatriate 

16 makes an election under subsection (a)(4) or 

17 (b) which results in the deferral of any tax im18 posed by reason of subsection (a), the deferred 

19 amount (including any interest, additional 

20 amount, addition to tax, assessable penalty, and 

21 costs attributable to the deferred amount) shall 

22 be a lien in favor of the United States on all 

23 property of the expatriate located in the United 

24 States (without regard to whether this section 

25 applies to the property). 
41

•S 19 IS 

1 ‘‘(B) DEFERRED AMOUNT.—For purposes 

2 of this subsection, the deferred amount is the 

3 amount of the increase in the covered expatri4 ate’s income tax which, but for the election 

5 under subsection (a)(4) or (b), would have oc6 curred by reason of this section for the taxable 

7 year including the expatriation date. 

8 ‘‘(2) PERIOD OF LIEN.—The lien imposed by 

9 this subsection shall arise on the expatriation date 

10 and continue until—

11 ‘‘(A) the liability for tax by reason of this 

12 section is satisfied or has become unenforceable 

13 by reason of lapse of time, or 

14 ‘‘(B) it is established to the satisfaction of 

15 the Secretary that no further tax liability may 

16 arise by reason of this section. 

17 ‘‘(3) CERTAIN RULES APPLY.—The rules set 

18 forth in paragraphs (1), (3), and (4) of section 

19 6324A(d) shall apply with respect to the lien im20 posed by this subsection as if it were a lien imposed 

21 by section 6324A. 

22 ‘‘(j) REGULATIONS.—The Secretary shall prescribe 

23 such regulations as may be necessary or appropriate to 

24 carry out the purposes of this section.’’. 
42

•S 19 IS 

1 (b) INCLUSION IN INCOME OF GIFTS AND BEQUESTS

2 RECEIVED BY UNITED STATES CITIZENS AND RESIDENTS

3 FROM EXPATRIATES.—Section 102 (relating to gifts, etc. 

4 not included in gross income) is amended by adding at 

5 the end the following new subsection: 

6 ‘‘(d) GIFTS AND INHERITANCES FROM COVERED EX7 PATRIATES.—

8 ‘‘(1) IN GENERAL.—Subsection (a) shall not ex9 clude from gross income the value of any property 

10 acquired by gift, bequest, devise, or inheritance from 

11 a covered expatriate after the expatriation date. For 

12 purposes of this subsection, any term used in this 

13 subsection which is also used in section 877A shall 

14 have the same meaning as when used in section 

15 877A. 

16 ‘‘(2) EXCEPTIONS FOR TRANSFERS OTHERWISE

17 SUBJECT TO ESTATE OR GIFT TAX.—Paragraph (1) 

18 shall not apply to any property if either—

19 ‘‘(A) the gift, bequest, devise, or inherit20 ance is—

21 ‘‘(i) shown on a timely filed return of 

22 tax imposed by chapter 12 as a taxable gift 

23 by the covered expatriate, or 

24 ‘‘(ii) included in the gross estate of 

25 the covered expatriate for purposes of 
43

•S 19 IS 

1 chapter 11 and shown on a timely filed re2 turn of tax imposed by chapter 11 of the 

3 estate of the covered expatriate, or 

4 ‘‘(B) no such return was timely filed but 

5 no such return would have been required to be 

6 filed even if the covered expatriate were a cit7 izen or long-term resident of the United 

8 States.’’. 

9 (c) DEFINITION OF TERMINATION OF UNITED

10 STATES CITIZENSHIP.—Section 7701(a) is amended by 

11 adding at the end the following new paragraph:

12 ‘‘(48) TERMINATION OF UNITED STATES CITI13 ZENSHIP.—

14 ‘‘(A) IN GENERAL.—An individual shall 

15 not cease to be treated as a United States cit16 izen before the date on which the individual’s 

17 citizenship is treated as relinquished under sec18 tion 877A(e)(3). 

19 ‘‘(B) DUAL CITIZENS.—Under regulations 

20 prescribed by the Secretary, subparagraph (A) 

21 shall not apply to an individual who became at 

22 birth a citizen of the United States and a cit23 izen of another country.’’. 

24 (d) INELIGIBILITY FOR VISA OR ADMISSION TO

25 UNITED STATES.—
44

•S 19 IS 

1 (1) IN GENERAL.—Section 212(a)(10)(E) of the 

2 Immigration and Nationality Act (8 U.S.C. 

3 1182(a)(10)(E)) is amended to read as follows: 

4 ‘‘(E) FORMER CITIZENS NOT IN COMPLI5 ANCE WITH EXPATRIATION REVENUE PROVI6 SIONS.—Any alien who is a former citizen of 

7 the United States who relinquishes United 

8 States citizenship (within the meaning of sec9 tion 877A(e)(3) of the Internal Revenue Code 

10 of 1986) and who is not in compliance with sec11 tion 877A of such Code (relating to expatria12 tion).’’. 

13 (2) AVAILABILITY OF INFORMATION.—

14 (A) IN GENERAL.—Section 6103(l) (relat15 ing to disclosure of returns and return informa16 tion for purposes other than tax administration) 

17 is amended by adding at the end the following 

18 new paragraph: 

19 ‘‘(18) DISCLOSURE TO DENY VISA OR ADMIS20 SION TO CERTAIN EXPATRIATES.—Upon written re21 quest of the Attorney General or the Attorney Gen22 eral’s delegate, the Secretary shall disclose whether 

23 an individual is in compliance with section 877A 

24 (and if not in compliance, any items of noncompli25 ance) to officers and employees of the Federal agen-
45

•S 19 IS 

1 cy responsible for administering section 

2 212(a)(10)(E) of the Immigration and Nationality 

3 Act solely for the purpose of, and to the extent nec4 essary in, administering such section 

5 212(a)(10)(E).’’. 

6 (B) SAFEGUARDS.—Section 6103(p)(4) 

7 (relating to safeguards) is amended by striking 

8 ‘‘or (17)’’ each place it appears and inserting 

9 ‘‘(17), or (18)’’. 

10 (3) EFFECTIVE DATE.—The amendments made 

11 by this subsection shall apply to individuals who re12 linquish United States citizenship on or after the 

13 date of the enactment of this Act. 

14 (e) CONFORMING AMENDMENTS.—

15 (1) Section 877 is amended by adding at the 

16 end the following new subsection: 

17 ‘‘(g) APPLICATION.—This section shall not apply to 

18 an expatriate (as defined in section 877A(e)) whose expa19 triation date (as so defined) occurs on or after September 

20 12, 2002.’’. 

21 (2) Section 2107 is amended by adding at the 

22 end the following new subsection: 

23 ‘‘(f) APPLICATION.—This section shall not apply to 

24 any expatriate subject to section 877A.’’. 
46

•S 19 IS 

1 (3) Section 2501(a)(3) is amended by adding at 

2 the end the following new subparagraph: 

3 ‘‘(F) APPLICATION.—This paragraph shall 

4 not apply to any expatriate subject to section 

5 877A.’’. 

6 (4)(A) Paragraph (1) of section 6039G(d) is 

7 amended by inserting ‘‘or 877A’’ after ‘‘section 

8 877’’. 

9 (B) The second sentence of section 6039G(e) is 

10 amended by inserting ‘‘or who relinquishes United 

11 States citizenship (within the meaning of section 

12 877A(e)(3))’’ after ‘‘877(a))’’. 

13 (C) Section 6039G(f) is amended by inserting 

14 ‘‘or 877A(e)(2)(B)’’ after ‘‘877(e)(1)’’. 

15 (f) CLERICAL AMENDMENT.—The table of sections 

16 for subpart A of part II of subchapter N of chapter 1 

17 is amended by inserting after the item relating to section 

18 877 the following new item:

‘‘Sec. 877A. Tax responsibilities of expatriation.’’.

19 (g) EFFECTIVE DATE.—

20 (1) IN GENERAL.—Except as provided in this 

21 subsection, the amendments made by this section 

22 shall apply to expatriates (within the meaning of 

23 section 877A(e) of the Internal Revenue Code of 

24 1986, as added by this section) whose expatriation 
47

•S 19 IS 

1 date (as so defined) occurs on or after September 

2 12, 2002. 

3 (2) GIFTS AND BEQUESTS.—Section 102(d) of 

4 the Internal Revenue Code of 1986 (as added by 

5 subsection (b)) shall apply to gifts and bequests re6 ceived on or after September 12, 2002, from an indi7 vidual or the estate of an individual whose expatria8 tion date (as so defined) occurs after such date. 

9 (3) DUE DATE FOR TENTATIVE TAX.—The due 

10 date under section 877A(h)(2) of the Internal Rev11 enue Code of 1986, as added by this section, shall 

12 in no event occur before the 90th day after the date 

13 of the enactment of this Act. 

14 SEC. 222. EXTENSION OF INTERNAL REVENUE SERVICE 

15 USER FEES. 

16 (a) IN GENERAL.—Chapter 77 (relating to miscella17 neous provisions) is amended by adding at the end the 

18 following new section: 

19 ‘‘SEC. 7527. INTERNAL REVENUE SERVICE USER FEES. 

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

21 a program requiring the payment of user fees for—

22 ‘‘(1) requests to the Internal Revenue Service 

23 for ruling letters, opinion letters, and determination 

24 letters, and 

25 ‘‘(2) other similar requests. 
48

•S 19 IS 

1 ‘‘(b) PROGRAM CRITERIA.—

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

3 program required by subsection (a)—

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

5 subcategories) established by the Secretary, 

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

7 account the average time for (and difficulty of) 

8 complying with requests in each category (and 

9 subcategory), and 

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

11 ‘‘(2) EXEMPTIONS, ETC.—

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

13 provide for such exemptions (and reduced fees) 

14 under such program as the Secretary deter15 mines to be appropriate. 

16 ‘‘(B) EXEMPTION FOR CERTAIN REQUESTS

17 REGARDING PENSION PLANS.—The Secretary 

18 shall not require payment of user fees under 

19 such program for requests for determination 

20 letters with respect to the qualified status of a 

21 pension benefit plan maintained solely by 1 or 

22 more eligible employers or any trust which is 

23 part of the plan. The preceding sentence shall 

24 not apply to any request—

25 ‘‘(i) made after the later of—
49

•S 19 IS 

1 ‘‘(I) the fifth plan year the pen2 sion benefit plan is in existence, or 

3 ‘‘(II) the end of any remedial 

4 amendment period with respect to the 

5 plan beginning within the first 5 plan 

6 years, or 

7 ‘‘(ii) made by the sponsor of any pro8 totype or similar plan which the sponsor 

9 intends to market to participating employ10 ers. 

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

12 For purposes of subparagraph (B)—

13 ‘‘(i) PENSION BENEFIT PLAN.—The 

14 term ‘pension benefit plan’ means a pen15 sion, profit-sharing, stock bonus, annuity, 

16 or employee stock ownership plan. 

17 ‘‘(ii) ELIGIBLE EMPLOYER.—The 

18 term ‘eligible employer’ means an eligible 

19 employer (as defined in section 

20 408(p)(2)(C)(i)(I)) which has at least 1 

21 employee who is not a highly compensated 

22 employee (as defined in section 414(q)) 

23 and is participating in the plan. The deter24 mination of whether an employer is an eli25 gible employer under subparagraph (B) 
50

•S 19 IS 

1 shall be made as of the date of the request 

2 described in such subparagraph. 

3 ‘‘(iii) DETERMINATION OF AVERAGE

4 FEES CHARGED.—For purposes of any de5 termination of average fees charged, any 

6 request to which subparagraph (B) applies 

7 shall not be taken into account. 

8 ‘‘(3) AVERAGE FEE REQUIREMENT.—The aver9 age fee charged under the program required by sub10 section (a) shall not be less than the amount deter11 mined 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.

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

13 this section with respect to requests made after September 

14 30, 2012.’’. 

15 (b) CONFORMING AMENDMENTS.—

16 (1) The table of sections for chapter 77 is 

17 amended by adding at the end the following new 

18 item:

‘‘Sec. 7527. Internal Revenue Service user fees.’’.

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

20 is repealed. 
51

•S 19 IS 

1 (3) Section 620 of the Economic Growth and 

2 Tax Relief Reconciliation Act of 2001 is repealed. 

3 (c) LIMITATIONS.—Notwithstanding any other provi4 sion of law, any fees collected pursuant to section 7527 

5 of the Internal Revenue Code of 1986, as added by sub6 section (a), shall not be expended by the Internal Revenue 

7 Service unless provided by an appropriations Act. 

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

9 this section shall apply to requests made after the date 

10 of the enactment of this Act. 

11 SEC. 223. PARTIAL PAYMENT OF TAX LIABILITY IN IN12 STALLMENT AGREEMENTS. 

13 (a) IN GENERAL.—

14 (1) Section 6159(a) (relating to authorization 

15 of agreements) is amended—

16 (A) by striking ‘‘satisfy liability for pay17 ment of’’ and inserting ‘‘make payment on’’, 

18 and 

19 (B) by inserting ‘‘full or partial’’ after ‘‘fa20 cilitate’’. 

21 (2) Section 6159(c) (relating to Secretary re22 quired to enter into installment agreements in cer23 tain cases) is amended in the matter preceding para24 graph (1) by inserting ‘‘full’’ before ‘‘payment’’. 
52

•S 19 IS 

1 (b) REQUIREMENT TO REVIEW PARTIAL PAYMENT

2 AGREEMENTS EVERY TWO YEARS.—Section 6159 is 

3 amended by redesignating subsections (d) and (e) as sub4 sections (e) and (f), respectively, and inserting after sub5 section (c) the following new subsection: 

6 ‘‘(d) SECRETARY REQUIRED TO REVIEW INSTALL7 MENT AGREEMENTS FOR PARTIAL COLLECTION EVERY

8 TWO YEARS.—In the case of an agreement entered into 

9 by the Secretary under subsection (a) for partial collection 

10 of a tax liability, the Secretary shall review the agreement 

11 at least once every 2 years.’’. 

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

13 this section shall apply to agreements entered into on or 

14 after the date of the enactment of this Act.

Æ