II 

108TH CONGRESS 

1ST SESSION S. 256

To provide incentives for charitable contributions by individuals and businesses, to improve the public disclosure of activities of exempt organizations, and to enhance the ability of low-income Americans to gain financial security by building assets, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 30, 2003

Mr. GRASSLEY (for himself, Mr. BAUCUS, Mr. SANTORUM, and Mr. 

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

A BILL

To provide incentives for charitable contributions by individuals and businesses, to improve the public disclosure 

of activities of exempt organizations, and to enhance 

the ability of low-income Americans to gain financial 

security by building assets, 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; ETC. 

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

5 ‘‘CARE Act of 2003’’. 

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend-
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1 ment or repeal is expressed in terms of an amendment 

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986. 

5 (c) TABLE OF CONTENTS.—The table of contents for 

6 this Act is as follows:

Sec. 1. Short title; etc. 

TITLE I—CHARITABLE GIVING INCENTIVES 

Sec. 101. Deduction for portion of charitable contributions to be allowed to individuals who do not itemize deductions. 

Sec. 102. Tax-free distributions from individual retirement accounts for charitable purposes. 

Sec. 103. Charitable deduction for contributions of food inventories. 

Sec. 104. Charitable deduction for contributions of book inventories. 

Sec. 105. Expansion of charitable contribution allowed for scientific property 

used for research and for computer technology and equipment 

used for educational purposes. 

Sec. 106. Modifications to encourage contributions of capital gain real property 

made for conservation purposes. 

Sec. 107. Exclusion of 25 percent of gain on sales or exchanges of land or 

water interests to eligible entities for conservation purposes. 

Sec. 108. Tax exclusion for cost-sharing payments under Partners for Fish and 

Wildlife Program. 

Sec. 109. Adjustment to basis of S corporation stock for certain charitable contributions. 

Sec. 110. Enhanced deduction for charitable contribution of literary, musical, 

artistic, and scholarly compositions. 

Sec. 111. Mileage reimbursements to charitable volunteers excluded from gross 

income. 

TITLE II—IMPROVE OVERSIGHT OF TAX-EXEMPT 

ORGANIZATIONS 

Sec. 201. Disclosure of written determinations. 

Sec. 202. Disclosure of Internet web site and name under which organization 

does business. 

Sec. 203. Modification to reporting capital transactions. 

Sec. 204. Disclosure that Form 990 is publicly available. 

Sec. 205. Disclosure to State officials of proposed actions related to section 

501(c) organizations. 

Sec. 206. Expansion of penalties to preparers of Form 990. 

Sec. 207. Notification requirement for entities not currently required to file. 

Sec. 208. Suspension of tax-exempt status of terrorist organizations. 

TITLE III—OTHER CHARITABLE AND EXEMPT ORGANIZATION 

PROVISIONS 
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Sec. 301. Modification of excise tax on unrelated business taxable income of 

charitable remainder trusts. 

Sec. 302. Modifications to section 512(b)(13). 

Sec. 303. Simplification of lobbying expenditure limitation. 

Sec. 304. Expedited review process for certain tax-exemption applications. 

Sec. 305. Clarification of definition of church tax inquiry. 

Sec. 306. Expansion of declaratory judgment remedy to tax-exempt organizations. 

Sec. 307. Definition of convention or association of churches. 

Sec. 308. Payments by charitable organizations to victims of war on terrorism. 

Sec. 309. Modification of scholarship foundation rules. 

Sec. 310. Treatment of certain hospital support organizations as qualified organizations for purposes of determining acquisition indebtedness. 

TITLE IV—SOCIAL SERVICES BLOCK GRANT 

Sec. 401. Restoration of funds for the Social Services Block Grant. 

Sec. 402. Restoration of authority to transfer up to 10 percent of TANF funds 

to the Social Services Block Grant. 

Sec. 403. Requirement to submit annual report on State activities. 

TITLE V—INDIVIDUAL DEVELOPMENT ACCOUNTS 

Sec. 501. Short title. 

Sec. 502. Purposes. 

Sec. 503. Definitions. 

Sec. 504. Structure and administration of qualified individual development account programs. 

Sec. 505. Procedures for opening and maintaining an individual development 

account and qualifying for matching funds. 

Sec. 506. Deposits by qualified individual development account programs. 

Sec. 507. Withdrawal procedures. 

Sec. 508. Certification and termination of qualified individual development account programs. 

Sec. 509. Reporting, monitoring, and evaluation. 

Sec. 510. Authorization of appropriations. 

Sec. 511. Matching funds for individual development accounts provided through 

a tax credit for qualified financial institutions. 

Sec. 512. Account funds disregarded for purposes of certain means-tested Federal programs. 

TITLE VI—MANAGEMENT OF EXEMPT ORGANIZATIONS 

Sec. 601. Authorization of appropriations.
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1 TITLE I—CHARITABLE GIVING 

2 INCENTIVES 

3 SEC. 101. DEDUCTION FOR PORTION OF CHARITABLE CON4 TRIBUTIONS TO BE ALLOWED TO INDIVID5 UALS WHO DO NOT ITEMIZE DEDUCTIONS. 

6 (a) IN GENERAL.—Section 170 (relating to chari7 table, etc., contributions and gifts) is amended by redesig8 nating subsection (m) as subsection (n) and by inserting 

9 after subsection (l) the following new subsection: 

10 ‘‘(m) DEDUCTION FOR INDIVIDUALS NOT ITEMIZING

11 DEDUCTIONS.—In the case of an individual who does not 

12 itemize deductions for any taxable year, there shall be 

13 taken into account as a direct charitable deduction under 

14 section 63 an amount equal to the amount allowable under 

15 subsection (a) for the taxable year for cash contributions, 

16 but only with respect to such contributions which exceed 

17 $250 ($500 in the case of a joint return), but do not ex18 ceed $500 ($1,000 in the case of a joint return).’’. 

19 (b) DIRECT CHARITABLE DEDUCTION.—

20 (1) IN GENERAL.—Subsection (b) of section 63 

21 (defining taxable income) is amended by striking 

22 ‘‘and’’ at the end of paragraph (1), by striking the 

23 period at the end of paragraph (2) and inserting ‘‘, 

24 and’’, and by adding at the end the following new 

25 paragraph: 
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1 ‘‘(3) the direct charitable deduction.’’. 

2 (2) DEFINITION.—Section 63 is amended by re3 designating subsection (g) as subsection (h) and by 

4 inserting after subsection (f) the following new sub5 section: 

6 ‘‘(g) DIRECT CHARITABLE DEDUCTION.—For pur7 poses of this section, the term ‘direct charitable deduction’ 

8 means that portion of the amount allowable under section 

9 170(a) which is taken as a direct charitable deduction for 

10 the taxable year under section 170(m).’’. 

11 (3) CONFORMING AMENDMENT.—Subsection (d) 

12 of section 63 is amended by striking ‘‘and’’ at the 

13 end of paragraph (1), by striking the period at the 

14 end of paragraph (2) and inserting ‘‘, and’’, and by 

15 adding at the end the following new paragraph: 

16 ‘‘(3) the direct charitable deduction.’’. 

17 (c) STUDY.—

18 (1) IN GENERAL.—The Secretary of the Treas19 ury shall study the effect of the amendments made 

20 by this section on increased charitable giving and 

21 taxpayer compliance, including a comparison of tax22 payer compliance by those who itemize their chari23 table contributions with those who claim a direct 

24 charitable deduction. 
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1 (2) REPORT.—By not later than December 31, 

2 2004, the Secretary of the Treasury shall report on 

3 the study required under paragraph (1) to the Com4 mittee on Finance of the Senate and the Committee 

5 on Ways and Means of the House of Representa6 tives.

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

8 this section shall apply to taxable years beginning after 

9 December 31, 2002, and before January 1, 2005. 

10 SEC. 102. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE11 TIREMENT ACCOUNTS FOR CHARITABLE 

12 PURPOSES. 

13 (a) IN GENERAL.—Subsection (d) of section 408 (re14 lating to individual retirement accounts) is amended by 

15 adding at the end the following new paragraph: 

16 ‘‘(8) DISTRIBUTIONS FOR CHARITABLE PUR17 POSES.—

18 ‘‘(A) IN GENERAL.—No amount shall be 

19 includible in gross income by reason of a quali20 fied charitable distribution. 

21 ‘‘(B) QUALIFIED CHARITABLE DISTRIBU22 TION.—For purposes of this paragraph, the 

23 term ‘qualified charitable distribution’ means 

24 any distribution from an individual retirement 

25 account—
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1 ‘‘(i) which is made directly by the 

2 trustee—

3 ‘‘(I) to an organization described 

4 in section 170(c), or

5 ‘‘(II) to a split-interest entity, 

6 and 

7 ‘‘(ii) which is made on or after the 

8 date that the individual for whose benefit 

9 the account is maintained has attained—

10 ‘‘(I) in the case of any distribu11 tion described in clause (i)(I), age 

701 12 ⁄2, and 

13 ‘‘(II) in the case of any distribu14 tion described in clause (i)(II), age 

591 15 ⁄2. 

16 A distribution shall be treated as a qualified 

17 charitable distribution only to the extent that 

18 the distribution would be includible in gross in19 come without regard to subparagraph (A) and, 

20 in the case of a distribution to a split-interest 

21 entity, only if no person holds an income inter22 est in the amounts in the split-interest entity 

23 attributable to such distribution other than one 

24 or more of the following: the individual for 

25 whose benefit such account is maintained, the 
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1 spouse of such individual, or any organization 

2 described in section 170(c). 

3 ‘‘(C) CONTRIBUTIONS MUST BE OTHER4 WISE DEDUCTIBLE.—For purposes of this para5 graph—

6 ‘‘(i) DIRECT CONTRIBUTIONS.—A dis7 tribution to an organization described in 

8 section 170(c) shall be treated as a quali9 fied charitable distribution only if a deduc10 tion for the entire distribution would be al11 lowable under section 170 (determined 

12 without regard to subsection (b) thereof 

13 and this paragraph). 

14 ‘‘(ii) SPLIT-INTEREST GIFTS.—A dis15 tribution to a split-interest entity shall be 

16 treated as a qualified charitable distribu17 tion only if a deduction for the entire value 

18 of the interest in the distribution for the 

19 use of an organization described in section 

20 170(c) would be allowable under section 

21 170 (determined without regard to sub22 section (b) thereof and this paragraph). 

23 ‘‘(D) APPLICATION OF SECTION 72.—Not24 withstanding section 72, in determining the ex25 tent to which a distribution is a qualified chari-
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1 table distribution, the entire amount of the dis2 tribution shall be treated as includible in gross 

3 income without regard to subparagraph (A) to 

4 the extent that such amount does not exceed 

5 the aggregate amount which would be so includ6 ible if all amounts were distributed from all in7 dividual retirement accounts otherwise taken 

8 into account in determining the inclusion on 

9 such distribution under section 72. Proper ad10 justments shall be made in applying section 72 

11 to other distributions in such taxable year and 

12 subsequent taxable years. 

13 ‘‘(E) SPECIAL RULES FOR SPLIT-INTEREST

14 ENTITIES.—

15 ‘‘(i) CHARITABLE REMAINDER

16 TRUSTS.—Notwithstanding section 664(b), 

17 distributions made from a trust described 

18 in subparagraph (G)(i) shall be treated as 

19 ordinary income in the hands of the bene20 ficiary to whom is paid the annuity de21 scribed in section 664(d)(1)(A) or the pay22 ment described in section 664(d)(2)(A). 

23 ‘‘(ii) POOLED INCOME FUNDS.—No 

24 amount shall be includible in the gross in25 come of a pooled income fund (as defined 
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1 in subparagraph (G)(ii)) by reason of a 

2 qualified charitable distribution to such 

3 fund, and all distributions from the fund 

4 which are attributable to qualified chari5 table distributions shall be treated as ordi6 nary income to the beneficiary. 

7 ‘‘(iii) CHARITABLE GIFT ANNU8 ITIES.—Qualified charitable distributions 

9 made for a charitable gift annuity shall not 

10 be treated as an investment in the con11 tract. 

12 ‘‘(F) DENIAL OF DEDUCTION.—Qualified 

13 charitable distributions shall not be taken into 

14 account in determining the deduction under sec15 tion 170. 

16 ‘‘(G) SPLIT-INTEREST ENTITY DEFINED.—

17 For purposes of this paragraph, the term ‘split18 interest entity’ means—

19 ‘‘(i) a charitable remainder annuity 

20 trust or a charitable remainder unitrust 

21 (as such terms are defined in section 

22 664(d)) which must be funded exclusively 

23 by qualified charitable distributions, 

24 ‘‘(ii) a pooled income fund (as defined 

25 in section 642(c)(5)), but only if the fund 
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1 accounts separately for amounts attrib2 utable to qualified charitable distributions, 

3 and 

4 ‘‘(iii) a charitable gift annuity (as de5 fined in section 501(m)(5)).’’. 

6 (b) MODIFICATIONS RELATING TO INFORMATION RE7 TURNS BY CERTAIN TRUSTS.—

8 (1) RETURNS.—Section 6034 (relating to re9 turns by trusts described in section 4947(a)(2) or 

10 claiming charitable deductions under section 642(c)) 

11 is amended to read as follows: 

12 ‘‘SEC. 6034. RETURNS BY TRUSTS DESCRIBED IN SECTION 

13 4947(a)(2) OR CLAIMING CHARITABLE DEDUC14 TIONS UNDER SECTION 642(c). 

15 ‘‘(a) TRUSTS DESCRIBED IN SECTION 4947(a)(2).—

16 Every trust described in section 4947(a)(2) shall furnish 

17 such information with respect to the taxable year as the 

18 Secretary may by forms or regulations require. 

19 ‘‘(b) TRUSTS CLAIMING A CHARITABLE DEDUCTION

20 UNDER SECTION 642(c).—

21 ‘‘(1) IN GENERAL.—Every trust not required to 

22 file a return under subsection (a) but claiming a 

23 charitable, etc., deduction under section 642(c) for 

24 the taxable year shall furnish such information with 
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1 respect to such taxable year as the Secretary may by 

2 forms or regulations prescribe, including:

3 ‘‘(A) the amount of the charitable, etc., de4 duction taken under section 642(c) within such 

5 year, 

6 ‘‘(B) the amount paid out within such year 

7 which represents amounts for which charitable, 

8 etc., deductions under section 642(c) have been 

9 taken in prior years,

10 ‘‘(C) the amount for which charitable, etc., 

11 deductions have been taken in prior years but 

12 which has not been paid out at the beginning 

13 of such year, 

14 ‘‘(D) the amount paid out of principal in 

15 the current and prior years for charitable, etc., 

16 purposes, 

17 ‘‘(E) the total income of the trust within 

18 such year and the expenses attributable thereto, 

19 and 

20 ‘‘(F) a balance sheet showing the assets, li21 abilities, and net worth of the trust as of the 

22 beginning of such year. 

23 ‘‘(2) EXCEPTIONS.—Paragraph (1) shall not 

24 apply in the case of a taxable year if all the net in25 come for such year, determined under the applicable 
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1 principles of the law of trusts, is required to be dis2 tributed currently to the beneficiaries. Paragraph (1) 

3 shall not apply in the case of a trust described in 

4 section 4947(a)(1).’’. 

5 (2) INCREASE IN PENALTY RELATING TO FIL6 ING OF INFORMATION RETURN BY SPLIT-INTEREST

7 TRUSTS.—Paragraph (2) of section 6652(c) (relating 

8 to returns by exempt organizations and by certain 

9 trusts) is amended by adding at the end the fol10 lowing new subparagraph: 

11 ‘‘(C) SPLIT-INTEREST TRUSTS.—In the 

12 case of a trust which is required to file a return 

13 under section 6034(a), subparagraphs (A) and 

14 (B) of this paragraph shall not apply and para15 graph (1) shall apply in the same manner as if 

16 such return were required under section 6033, 

17 except that—

18 ‘‘(i) the 5 percent limitation in the 

19 second sentence of paragraph (1)(A) shall 

20 not apply, 

21 ‘‘(ii) in the case of any trust with 

22 gross income in excess of $250,000, the 

23 first sentence of paragraph (1)(A) shall be 

24 applied by substituting ‘$100’ for ‘$20’, 

25 and the second sentence thereof shall be 
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1 applied by substituting ‘$50,000’ for 

2 ‘$10,000’, and 

3 ‘‘(iii) the third sentence of paragraph 

4 (1)(A) shall be disregarded. 

5 In addition to any penalty imposed on the trust 

6 pursuant to this subparagraph, if the person re7 quired to file such return knowingly fails to file 

8 the return, such penalty shall also be imposed 

9 on such person who shall be personally liable 

10 for such penalty.’’. 

11 (3) CONFIDENTIALITY OF NONCHARITABLE

12 BENEFICIARIES.—Subsection (b) of section 6104 

13 (relating to inspection of annual information re14 turns) is amended by adding at the end the fol15 lowing new sentence: ‘‘In the case of a trust which 

16 is required to file a return under section 6034(a), 

17 this subsection shall not apply to information re18 garding beneficiaries which are not organizations de19 scribed in section 170(c).’’. 

20 (c) EFFECTIVE DATES.—

21 (1) SUBSECTION (a).—The amendment made 

22 by subsection (a) shall apply to distributions made 

23 after the date of the enactment. 
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1 (2) SUBSECTION (b).—The amendments made 

2 by subsection (b) shall apply to returns for taxable 

3 years beginning after December 31, 2003. 

4 SEC. 103. CHARITABLE DEDUCTION FOR CONTRIBUTIONS 

5 OF FOOD INVENTORIES. 

6 (a) IN GENERAL.—Subsection (e) of section 170 (re7 lating to certain contributions of ordinary income and cap8 ital gain property) is amended by adding at the end the 

9 following new paragraph: 

10 ‘‘(7) APPLICATION OF PARAGRAPH (3) TO CER11 TAIN CONTRIBUTIONS OF FOOD INVENTORY.—For 

12 purposes of this section—

13 ‘‘(A) EXTENSION TO INDIVIDUALS.—In the 

14 case of a charitable contribution of apparently 

15 wholesome food—

16 ‘‘(i) paragraph (3)(A) shall be applied 

17 without regard to whether the contribution 

18 is made by a C corporation, and 

19 ‘‘(ii) in the case of a taxpayer other 

20 than a C corporation, the aggregate 

21 amount of such contributions from any 

22 trade or business (or interest therein) of 

23 the taxpayer for any taxable year which 

24 may be taken into account under this sec25 tion shall not exceed 10 percent of the tax-
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1 payer’s net income from any such trade or 

2 business, computed without regard to this 

3 section, for such taxable year. 

4 ‘‘(B) LIMITATION ON REDUCTION.—In the 

5 case of a charitable contribution of apparently 

6 wholesome food, notwithstanding paragraph 

7 (3)(B), the amount of the reduction determined 

8 under paragraph (1)(A) shall not exceed the 

9 amount by which the fair market value of such 

10 property exceeds twice the basis of such prop11 erty. 

12 ‘‘(C) DETERMINATION OF BASIS.—If a 

13 taxpayer—

14 ‘‘(i) does not account for inventories 

15 under section 471, and 

16 ‘‘(ii) is not required to capitalize indi17 rect costs under section 263A, 

18 the taxpayer may elect, solely for purposes of 

19 paragraph (3)(B), to treat the basis of any ap20 parently wholesome food as being equal to 25 

21 percent of the fair market value of such food. 

22 ‘‘(D) DETERMINATION OF FAIR MARKET

23 VALUE.—In the case of a charitable contribu24 tion of apparently wholesome food which is a 

25 qualified contribution (within the meaning of 
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1 paragraph (3), as modified by subparagraph 

2 (A) of this paragraph) and which, solely by rea3 son of internal standards of the taxpayer or

4 lack of market, cannot or will not be sold, the 

5 fair market value of such contribution shall be 

6 determined—

7 ‘‘(i) without regard to such internal 

8 standards or such lack of market and 

9 ‘‘(ii) by taking into account the price 

10 at which the same or substantially the 

11 same food items (as to both type and qual12 ity) are sold by the taxpayer at the time of 

13 the contribution (or, if not so sold at such 

14 time, in the recent past). 

15 ‘‘(E) APPARENTLY WHOLESOME FOOD.—

16 For purposes of this paragraph, the term ‘ap17 parently wholesome food’ has the meaning given 

18 such term by section 22(b)(2) of the Bill Emer19 son Good Samaritan Food Donation Act (42 

20 U.S.C. 1791(b)(2)), as in effect on the date of 

21 the enactment of this paragraph.’’. 

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

23 this section shall apply to contributions made after the 

24 date of the enactment of this Act. 
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1 SEC. 104. CHARITABLE DEDUCTION FOR CONTRIBUTIONS 

2 OF BOOK INVENTORIES. 

3 (a) IN GENERAL.—Section 170(e)(3) (relating to cer4 tain contributions of ordinary income and capital gain 

5 property) is amended by redesignating subparagraph (C) 

6 as subparagraph (D) and by inserting after subparagraph 

7 (B) the following new subparagraph: 

8 ‘‘(C) SPECIAL RULE FOR CONTRIBUTIONS

9 OF BOOK INVENTORY FOR EDUCATIONAL PUR10 POSES.—

11 ‘‘(i) CONTRIBUTIONS OF BOOK INVEN12 TORY.—In determining whether a qualified 

13 book contribution is a qualified contribu14 tion, subparagraph (A) shall be applied 

15 without regard to whether—

16 ‘‘(I) the donee is an organization 

17 described in the matter preceding 

18 clause (i) of subparagraph (A), and 

19 ‘‘(II) the property is to be used 

20 by the donee solely for the care of the 

21 ill, the needy, or infants. 

22 ‘‘(ii) AMOUNT OF REDUCTION.—Not23 withstanding subparagraph (B), the 

24 amount of the reduction determined under 

25 paragraph (1)(A) shall not exceed the 

26 amount by which the fair market value of 
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1 the contributed property (as determined by 

2 the taxpayer using a bona fide published 

3 market price for such book) exceeds twice 

4 the basis of such property. 

5 ‘‘(iii) QUALIFIED BOOK CONTRIBU6 TION.—For purposes of this paragraph, 

7 the term ‘qualified book contribution’ 

8 means a charitable contribution of books, 

9 but only if the requirements of clauses (iv) 

10 and (v) are met. 

11 ‘‘(iv) IDENTITY OF DONEE.—The re12 quirement of this clause is met if the con13 tribution is to an organization—

14 ‘‘(I) described in subclause (I) or 

15 (III) of paragraph (6)(B)(i), or 

16 ‘‘(II) described in section 

17 501(c)(3) and exempt from tax under 

18 section 501(a) (other than a private 

19 foundation, as defined in section 

20 509(a), which is not an operating 

21 foundation, as defined in section 

22 4942(j)(3)), which is organized pri23 marily to make books available to the 

24 general public at no cost or to operate 

25 a literacy program. 
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1 ‘‘(v) CERTIFICATION BY DONEE.—The 

2 requirement of this clause is met if, in ad3 dition to the certifications required by sub4 paragraph (A) (as modified by this sub5 paragraph), the donee certifies in writing 

6 that—

7 ‘‘(I) the books are suitable, in 

8 terms of currency, content, and quan9 tity, for use in the donee’s educational 

10 programs, and 

11 ‘‘(II) the donee will use the books 

12 in its educational programs. 

13 ‘‘(vi) BONA FIDE PUBLISHED MARKET

14 PRICE.—For purposes of this subpara15 graph, the term ‘bona fide published mar16 ket price’ means, with respect to any book, 

17 a price—

18 ‘‘(I) determined using the same 

19 printing and edition, 

20 ‘‘(II) published within 7 years 

21 preceding the contribution of such 

22 book, 

23 ‘‘(III) determined as a result of 

24 an arm’s length transaction, and 
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1 ‘‘(IV) for which such a book has 

2 been customarily sold.’’. 

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

4 this section shall apply to contributions made after the 

5 date of the enactment of this Act 

6 SEC. 105. EXPANSION OF CHARITABLE CONTRIBUTION AL7 LOWED FOR SCIENTIFIC PROPERTY USED 

8 FOR RESEARCH AND FOR COMPUTER TECH9 NOLOGY AND EQUIPMENT USED FOR EDU10 CATIONAL PURPOSES. 

11 (a) SCIENTIFIC PROPERTY USED FOR RESEARCH.—

12 (1) IN GENERAL.—Clause (ii) of section 

13 170(e)(4)(B) (defining qualified research contribu14 tions) is amended by inserting ‘‘or assembled’’ after 

15 ‘‘constructed’’. 

16 (2) CONFORMING AMENDMENT.—Clause (iii) of 

17 section 170(e)(4)(B) is amended by inserting ‘‘or as18 sembling’’ after ‘‘construction’’. 

19 (b) COMPUTER TECHNOLOGY AND EQUIPMENT FOR

20 EDUCATIONAL PURPOSES.—

21 (1) IN GENERAL.—Clause (ii) of section 

22 170(e)(6)(B) is amended by inserting ‘‘or assem23 bled’’ after ‘‘constructed’’ and ‘‘or assembling’’ after 

24 ‘‘construction’’. 
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1 (2) SPECIAL RULE MADE PERMANENT.—Sec2 tion 170(e)(6) is amended by striking subparagraph 

3 (G). 

4 (3) CONFORMING AMENDMENTS.—Subpara5 graph (D) of section 170(e)(6) is amended by insert6 ing ‘‘or assembled’’ after ‘‘constructed’’ and ‘‘or as7 sembling’’ after ‘‘construction’’. 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2002. 

11 SEC. 106. MODIFICATIONS TO ENCOURAGE CONTRIBU12 TIONS OF CAPITAL GAIN REAL PROPERTY 

13 MADE FOR CONSERVATION PURPOSES. 

14 (a) IN GENERAL.—Section 170(h) (relating to quali15 fied conservation contribution) is amended by adding at 

16 the end the following new paragraph: 

17 ‘‘(7) ADDITIONAL INCENTIVES FOR QUALIFIED

18 CONSERVATION CONTRIBUTIONS.—

19 ‘‘(A) IN GENERAL.—In the case of any 

20 qualified conservation contribution (as defined 

21 in paragraph (1)) made by an individual—

22 ‘‘(i) subparagraph (C) of subsection 

23 (b)(1) shall not apply, 

24 ‘‘(ii) except as provided in subpara25 graph (B)(i), subsections (b)(1)(A) and 
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1 (d)(1) shall be applied separately with re2 spect to such contributions by treating ref3 erences to 50 percent of the taxpayer’s

4 contribution base as references to the 

5 amount of such percentage of such base re6 duced by the amount of other contributions 

7 allowable under subsection (b)(1)(A), and 

8 ‘‘(iii) subparagraph (A) of subsection 

9 (d)(1) shall be applied—

10 ‘‘(I) by substituting ‘15 suc11 ceeding taxable years’ for ‘5 suc12 ceeding taxable years’, and 

13 ‘‘(II) by applying clause (ii) to 

14 each of the 15 succeeding taxable 

15 years. 

16 ‘‘(B) SPECIAL RULES FOR ELIGIBLE FARM17 ERS AND RANCHERS.—

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

19 such contributions made by an eligible 

20 farmer or rancher—

21 ‘‘(I) if the taxpayer is an indi22 vidual, subsections (b)(1)(A) and 

23 (d)(1) shall be applied separately with 

24 respect to such contributions by sub25 stituting ‘the taxpayer’s contribution 
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1 base reduced by the amount of other 

2 contributions allowable under sub3 section (b)(1)(A)’ for ‘50 percent of 

4 the taxpayer’s contribution base’ each 

5 place it appears, and 

6 ‘‘(II) if the taxpayer is a corpora7 tion, subsections (b)(2) and (d)(2) 

8 shall be applied separately with re9 spect to such contributions, subsection 

10 (b)(2) shall be applied with respect to 

11 such contributions as if such sub12 section did not contain the words ‘10 

13 percent of’ and as if subparagraph 

14 (A) thereof read ‘the deduction under 

15 this section for qualified conservation 

16 contributions’, and rules similar to the 

17 rules of subparagraph (A)(iii) shall 

18 apply for purposes of subsection 

19 (d)(2). 

20 ‘‘(ii) DEFINITION.—For purposes of 

21 clause (i), the term ‘eligible farmer or 

22 rancher’ means a taxpayer whose gross in23 come from the trade or business of farm24 ing (within the meaning of section 

25 2032A(e)(5)) is at least 51 percent of the 
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1 taxpayer’s gross income for the taxable 

2 year, and, in the case of a C corporation, 

3 the stock of which is not publicly traded on 

4 a recognized exchange.’’. 

5 (c) EFFECTIVE DATE.—The amendment made by 

6 this section shall apply to contributions made after the 

7 date of the enactment of this Act. 

8 SEC. 107. EXCLUSION OF 25 PERCENT OF GAIN ON SALES 

9 OR EXCHANGES OF LAND OR WATER INTER10 ESTS TO ELIGIBLE ENTITIES FOR CONSERVA11 TION PURPOSES. 

12 (a) IN GENERAL.—Part III of subchapter B of chap13 ter 1 (relating to items specifically excluded from gross 

14 income) is amended by inserting after section 121 the fol15 lowing new section: 

16 ‘‘SEC. 121A. 25-PERCENT EXCLUSION OF GAIN ON SALES OR 

17 EXCHANGES OF LAND OR WATER INTERESTS 

18 TO ELIGIBLE ENTITIES FOR CONSERVATION 

19 PURPOSES. 

20 ‘‘(a) EXCLUSION.—Gross income shall not include 25 

21 percent of the qualifying gain from a conservation sale of 

22 a long-held qualifying land or water interest. 

23 ‘‘(b) QUALIFYING GAIN.—For purposes of this sec24 tion—
26

•S 256 IS 

1 ‘‘(1) IN GENERAL.—The term ‘qualifying gain’ 

2 means any gain which would be recognized as long3 term capital gain, reduced by the amount of any 

4 long-term capital gain attributable to disqualified 

5 improvements. 

6 ‘‘(2) DISQUALIFIED IMPROVEMENT.—For pur7 poses of paragraph (1), the term ‘disqualified im8 provement’ means any building, structure, or other 

9 improvement, other than—

10 ‘‘(A) any improvement which is described 

11 in section 175(c)(1), determined—

12 ‘‘(i) without regard to the require13 ments that the taxpayer be engaged in 

14 farming, and 

15 ‘‘(ii) without taking into account sub16 paragraphs (A) and (B) thereof, or 

17 ‘‘(B) any improvement which the Secretary 

18 determines directly furthers conservation pur19 poses. 

20 ‘‘(3) SPECIAL RULE FOR SALES OF STOCK.—If 

21 the long-held qualifying land or water interest is 1 

22 or more shares of stock in a qualifying land or water 

23 corporation, the qualifying gain is equal to the lesser 

24 of—
27

•S 256 IS 

1 ‘‘(A) the qualifying gain determined under 

2 paragraph (1), or 

3 ‘‘(B) the product of—

4 ‘‘(i) the percentage of such corpora5 tion’s stock which is transferred by the 

6 taxpayer, times 

7 ‘‘(ii) the amount which would have 

8 been the qualifying gain (determined under 

9 paragraph (1)) if there had been a con10 servation sale by such corporation of all of 

11 its interests in the land and water for a 

12 price equal to the product of the fair mar13 ket value of such interests times the ratio 

14 of—

15 ‘‘(I) the proceeds of the conserva16 tion sale of the stock, to 

17 ‘‘(II) the fair market value of the 

18 stock which was the subject of the 

19 conservation sale. 

20 ‘‘(c) CONSERVATION SALE.—For purposes of this 

21 section, the term ‘conservation sale’ means a sale or ex22 change which meets the following requirements: 

23 ‘‘(1) TRANSFEREE IS AN ELIGIBLE ENTITY.—

24 The transferee of the long-held qualifying land or 

25 water interest is an eligible entity. 
28

•S 256 IS 

1 ‘‘(2) QUALIFYING LETTER OF INTENT RE2 QUIRED.—At the time of the sale or exchange, such

3 transferee provides the taxpayer with a qualifying 

4 letter of intent. 

5 ‘‘(3) NONAPPLICATION TO CERTAIN SALES.—

6 The sale or exchange is not made pursuant to an 

7 order of condemnation or eminent domain. 

8 ‘‘(4) CONTROLLING INTEREST IN STOCK SALE

9 REQUIRED.—In the case of the sale or exchange of 

10 stock in a qualifying land or water corporation, at 

11 the end of the taxpayer’s taxable year in which such 

12 sale or exchange occurs, the transferee’s ownership 

13 of stock in such corporation meets the requirements 

14 of section 1504(a)(2) (determined by substituting 

15 ‘90 percent’ for ‘80 percent’ each place it appears). 

16 ‘‘(d) LONG-HELD QUALIFYING LAND OR WATER IN17 TEREST.—For purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘long-held quali19 fying land or water interest’ means any qualifying 

20 land or water interest owned by the taxpayer or a 

21 member of the taxpayer’s family (as defined in sec22 tion 2032A(e)(2)) at all times during the 5-year pe23 riod ending on the date of the sale. 

24 ‘‘(2) QUALIFYING LAND OR WATER INTER25 EST.—
29

•S 256 IS 

1 ‘‘(A) IN GENERAL.—The term ‘qualifying 

2 land or water interest’ means a real property 

3 interest which constitutes—

4 ‘‘(i) a taxpayer’s entire interest in 

5 land, 

6 ‘‘(ii) a taxpayer’s entire interest in 

7 water rights, 

8 ‘‘(iii) a qualified real property interest 

9 (as defined in section 170(h)(2)), or 

10 ‘‘(iv) stock in a qualifying land or 

11 water corporation. 

12 ‘‘(B) ENTIRE INTEREST.—For purposes of 

13 clause (i) or (ii) of subparagraph (A)—

14 ‘‘(i) a partial interest in land or water 

15 is not a taxpayer’s entire interest if an in16 terest in land or water was divided in order 

17 to create such partial interest in order to 

18 avoid the requirements of such clause or 

19 section 170(f)(3)(A), and 

20 ‘‘(ii) a taxpayer’s entire interest in 

21 certain land does not fail to satisfy sub22 paragraph (A)(i) solely because the tax23 payer has retained an interest in other 

24 land, even if the other land is contiguous 

25 with such certain land and was acquired by 
30

•S 256 IS 

1 the taxpayer along with such certain land 

2 in a single conveyance. 

3 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 

4 section—

5 ‘‘(1) ELIGIBLE ENTITY.—The term ‘eligible en6 tity’ means—

7 ‘‘(A) a governmental unit referred to in 

8 section 170(c)(1), or an agency or department 

9 thereof operated primarily for 1 or more of the 

10 conservation purposes specified in clause (i), 

11 (ii), or (iii) of section 170(h)(4)(A), or 

12 ‘‘(B) an entity which is—

13 ‘‘(i) described in section 

14 170(b)(1)(A)(vi) or section 170(h)(3)(B), 

15 and 

16 ‘‘(ii) organized and at all times oper17 ated primarily for 1 or more of the con18 servation purposes specified in clause (i), 

19 (ii), or (iii) of section 170(h)(4)(A). 

20 ‘‘(2) QUALIFYING LETTER OF INTENT.—The 

21 term ‘qualifying letter of intent’ means a written let22 ter of intent which includes the following statement: 

23 ‘The transferee’s intent is that this acquisition will 

24 serve 1 or more of the conservation purposes speci25 fied in clause (i), (ii), or (iii) of section 170(h)(4)(A) 
31

•S 256 IS 

1 of the Internal Revenue Code of 1986, that the 

2 transferee’s use of the property so acquired will be 

3 consistent with section 170(h)(5) of such Code, and 

4 that the use of the property will continue to be con5 sistent with such section, even if ownership or pos6 session of such property is subsequently transferred 

7 to another person.’

8 ‘‘(3) QUALIFYING LAND OR WATER CORPORA9 TION.—The term ‘qualifying land or water corpora10 tion’ means a C corporation (as defined in section 

11 1361(a)(2)) if, as of the date of the conservation 

12 sale—

13 ‘‘(A) the fair market value of the corpora14 tion’s interests in land or water held by the cor15 poration at all times during the preceding 5 

16 years equals or exceeds 90 percent of the fair 

17 market value of all of such corporation’s assets, 

18 and 

19 ‘‘(B) not more than 50 percent of the total 

20 fair market value of such corporation’s assets 

21 consists of water rights or infrastructure re22 lated to the delivery of water, or both. 

23 ‘‘(f) TAX ON SUBSEQUENT TRANSFERS OR REMOV24 ALS OF CONSERVATION RESTRICTIONS.—
32

•S 256 IS 

1 ‘‘(1) IN GENERAL.—A tax is hereby imposed on 

2 any subsequent—

3 ‘‘(A) transfer by an eligible entity of own4 ership or possession, whether by sale, exchange, 

5 or lease, of property acquired directly or indi6 rectly in—

7 ‘‘(i) a conservation sale described in 

8 subsection (a), or 

9 ‘‘(ii) a transfer described in clause (i), 

10 (ii), or (iii) of paragraph (4)(A), or 

11 ‘‘(B) removal of a conservation restriction 

12 contained in an instrument of conveyance of 

13 such property. 

14 ‘‘(2) AMOUNT OF TAX.—The amount of tax im15 posed by paragraph (1) on any transfer or removal 

16 shall be equal to the sum of—

17 ‘‘(A) either—

18 ‘‘(i) 20 percent of the fair market 

19 value (determined at the time of the trans20 fer) of the property the ownership or pos21 session of which is transferred, or 

22 ‘‘(ii) 20 percent of the fair market 

23 value (determined at the time immediately 

24 after the removal) of the property upon 
33

•S 256 IS 

1 which the conservation restriction was re2 moved, plus 

3 ‘‘(B) the product of—

4 ‘‘(i) the highest rate of tax specified 

5 in section 11, times 

6 ‘‘(ii) any gain or income realized by 

7 the transferor or person removing such re8 striction as a result of the transfer or re9 moval. 

10 ‘‘(3) LIABILITY.—The tax imposed by para11 graph (1) shall be paid—

12 ‘‘(A) on any transfer, by the transferor, 

13 and 

14 ‘‘(B) on any removal of a conservation re15 striction contained in an instrument of convey16 ance, by the person removing such restriction. 

17 ‘‘(4) RELIEF FROM LIABILITY.—The person 

18 (otherwise liable for any tax imposed by paragraph 

19 (1)) shall be relieved of liability for the tax imposed 

20 by paragraph (1)—

21 ‘‘(A) with respect to any transfer if—

22 ‘‘(i) the transferee is an eligible entity 

23 which provides such person, at the time of 

24 transfer, a qualifying letter of intent,
34

•S 256 IS 

1 ‘‘(ii) the transferee is not an eligible 

2 entity, it is established to the satisfaction 

3 of the Secretary, that the transfer of own4 ership or possession, as the case may be, 

5 will be consistent with section 170(h)(5), 

6 and the transferee provides such person, at 

7 the time of transfer, a qualifying letter of 

8 intent, or 

9 ‘‘(iii) tax has previously been paid 

10 under this subsection as a result of a prior 

11 transfer of ownership or possession of the 

12 same property, or 

13 ‘‘(B) with respect to any removal of a con14 servation restriction contained in an instrument 

15 of conveyance, if it is established to the satis16 faction of the Secretary that the retention of 

17 the restriction was impracticable or impossible 

18 and the proceeds continue to be used in a man19 ner consistent with 1 or more of the conserva20 tion purposes specified in clause (i), (ii), or (iii) 

21 of section 170(h)(4)(A). 

22 ‘‘(5) ADMINISTRATIVE PROVISIONS.—For pur23 poses of subtitle F, the taxes imposed by this sub24 section shall be treated as excise taxes with respect 
35

•S 256 IS 

1 to which the deficiency procedures of such subtitle 

2 apply. 

3 ‘‘(6) REPORTING.—The Secretary may require 

4 such reporting as may be necessary or appropriate 

5 to further the purpose under this section that any 

6 conservation use be in perpetuity.’’. 

7 (b) CLERICAL AMENDMENT.—The table of sections 

8 for part III of subchapter B of chapter 1 is amended by 

9 inserting after the item relating to section 121 the fol10 lowing new item:

‘‘Sec. 121A. 25-percent exclusion of gain on sales or exchanges 

of land or water interests to eligible entities for 

conservation purposes.’’.

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

12 this section shall apply to sales or exchanges occurring 

13 after December 31, 2003. 

14 SEC. 108. TAX EXCLUSION FOR COST-SHARING PAYMENTS 

15 UNDER PARTNERS FOR FISH AND WILDLIFE 

16 PROGRAM. 

17 (a) IN GENERAL.—Section 126(a) (relating to cer18 tain cost-sharing payments) is amended by redesignating 

19 paragraph (10) as paragraph (11) and by inserting after 

20 paragraph (9) the following: 

21 ‘‘(10) The Partners for Fish and Wildlife Pro22 gram authorized by the Fish and Wildlife Act of 

23 1956 (16 U.S.C. 742a et seq.).’’
36

•S 256 IS 

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

2 this section shall apply to payments received after the date 

3 of the enactment of this Act. 

4 SEC. 109. ADJUSTMENT TO BASIS OF S CORPORATION 

5 STOCK FOR CERTAIN CHARITABLE CON6 TRIBUTIONS. 

7 (a) IN GENERAL.—Paragraph (2) of section 1367(a) 

8 (relating to adjustments to basis of stock of shareholders, 

9 etc.) is amended by adding at the end the following new 

10 flush sentence: 

11 ‘‘The decrease under subparagraph (B) by reason of 

12 a charitable contribution (as defined in section 

13 170(c)) of property shall be the amount equal to the 

14 shareholder’s pro rata share of the adjusted basis of 

15 such property.’’. 

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

17 this section shall apply to contributions made after the 

18 date of the enactment of this Act. 

19 SEC. 110. ENHANCED DEDUCTION FOR CHARITABLE CON20 TRIBUTION OF LITERARY, MUSICAL, ARTIS21 TIC, AND SCHOLARLY COMPOSITIONS. 

22 (a) IN GENERAL.—Subsection (e) of section 170 (re23 lating to certain contributions of ordinary income and cap24 ital gain property), as amended by this Act, is amended 

25 by adding at the end the following new paragraph: 
37

•S 256 IS 

1 ‘‘(8) SPECIAL RULE FOR CERTAIN CONTRIBU2 TIONS OF LITERARY, MUSICAL, ARTISTIC, OR SCHOL3 ARLY COMPOSITIONS.—

4 ‘‘(A) IN GENERAL.—In the case of a quali5 fied artistic charitable contribution—

6 ‘‘(i) the amount of such contribution 

7 taken into account under this section shall 

8 be the fair market value of the property 

9 contributed (determined at the time of 

10 such contribution), and 

11 ‘‘(ii) no reduction in the amount of 

12 such contribution shall be made under 

13 paragraph (1). 

14 ‘‘(B) QUALIFIED ARTISTIC CHARITABLE

15 CONTRIBUTION.—For purposes of this para16 graph, the term ‘qualified artistic charitable 

17 contribution’ means a charitable contribution of 

18 any literary, musical, artistic, or scholarly com19 position, or similar property, or the copyright 

20 thereon (or both), but only if—

21 ‘‘(i) such property was created by the 

22 personal efforts of the taxpayer making 

23 such contribution no less than 18 months 

24 prior to such contribution, 

25 ‘‘(ii) the taxpayer—
38

•S 256 IS 

1 ‘‘(I) has received a qualified ap2 praisal of the fair market value of 

3 such property in accordance with the 

4 regulations under this section, and 

5 ‘‘(II) attaches to the taxpayer’s 

6 income tax return for the taxable year 

7 in which such contribution was made 

8 a copy of such appraisal, 

9 ‘‘(iii) the donee is an organization de10 scribed in subsection (b)(1)(A), 

11 ‘‘(iv) the use of such property by the 

12 donee is related to the purpose or function 

13 constituting the basis for the donee’s ex14 emption under section 501 (or, in the case 

15 of a governmental unit, to any purpose or 

16 function described under section 501(c)), 

17 ‘‘(v) the taxpayer receives from the 

18 donee a written statement representing 

19 that the donee’s use of the property will be 

20 in accordance with the provisions of clause 

21 (iv), and 

22 ‘‘(vi) the written appraisal referred to 

23 in clause (ii) includes evidence of the ex24 tent (if any) to which property created by 

25 the personal efforts of the taxpayer and of
39

•S 256 IS 

1 the same type as the donated property is 

2 or has been—

3 ‘‘(I) owned, maintained, and dis4 played by organizations described in 

5 subsection (b)(1)(A), and 

6 ‘‘(II) sold to or exchanged by 

7 persons other than the taxpayer, 

8 donee, or any related person (as de9 fined in section 465(b)(3)(C)). 

10 ‘‘(C) MAXIMUM DOLLAR LIMITATION; NO

11 CARRYOVER OF INCREASED DEDUCTION.—The 

12 increase in the deduction under this section by 

13 reason of this paragraph for any taxable year—

14 ‘‘(i) shall not exceed the artistic ad15 justed gross income of the taxpayer for 

16 such taxable year, and 

17 ‘‘(ii) shall not be taken into account in 

18 determining the amount which may be car19 ried from such taxable year under sub20 section (d). 

21 ‘‘(D) ARTISTIC ADJUSTED GROSS IN22 COME.—For purposes of this paragraph, the 

23 term ‘artistic adjusted gross income’ means 

24 that portion of the adjusted gross income of the 

25 taxpayer for the taxable year attributable to—
40

•S 256 IS 

1 ‘‘(i) income from the sale or use of 

2 property created by the personal efforts of 

3 the taxpayer which is of the same type as 

4 the donated property, and 

5 ‘‘(ii) income from teaching, lecturing, 

6 performing, or similar activity with respect 

7 to property described in clause (i). 

8 ‘‘(E) PARAGRAPH NOT TO APPLY TO CER9 TAIN CONTRIBUTIONS.—Subparagraph (A) shall 

10 not apply to any charitable contribution of any 

11 letter, memorandum, or similar property which 

12 was written, prepared, or produced by or for an 

13 individual while the individual is an officer or 

14 employee of any person (including any govern15 ment agency or instrumentality) unless such 

16 letter, memorandum, or similar property is en17 tirely personal. 

18 ‘‘(F) COPYRIGHT TREATED AS SEPARATE

19 PROPERTY FOR PARTIAL INTEREST RULE.—In 

20 the case of a qualified artistic charitable con21 tribution, the tangible literary, musical, artistic, 

22 or scholarly composition, or similar property 

23 and the copyright on such work shall be treated 

24 as separate properties for purposes of this para25 graph and subsection (f)(3).’’. 
41

•S 256 IS 

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

2 this section shall apply to contributions made after the 

3 date of the enactment of this Act. 

4 SEC. 111. MILEAGE REIMBURSEMENTS TO CHARITABLE 

5 VOLUNTEERS EXCLUDED FROM GROSS IN6 COME. 

7 (a) IN GENERAL.—Part III of subchapter B of chap8 ter 1 is amended by inserting after section 139 the fol9 lowing new section: 

10 ‘‘SEC. 139A. MILEAGE REIMBURSEMENTS TO CHARITABLE 

11 VOLUNTEERS. 

12 ‘‘(a) IN GENERAL.—Gross income of an individual 

13 does not include amounts received, from an organization 

14 described in section 170(c), as reimbursement of operating 

15 expenses with respect to use of a passenger automobile 

16 for the benefit of such organization. The preceding sen17 tence shall apply only to the extent that such reimburse18 ment would be deductible under this chapter if section 

19 274(d) were applied—

20 ‘‘(1) by using the standard business mileage 

21 rate established under such section, and 

22 ‘‘(2) as if the individual were an employee of an 

23 organization not described in section 170(c). 

24 ‘‘(b) APPLICATION TO VOLUNTEER SERVICES

25 ONLY.—Subsection (a) shall not apply with respect to any 
42

•S 256 IS 

1 expenses relating to the performance of services for com2 pensation. 

3 ‘‘(c) NO DOUBLE BENEFIT.—A taxpayer may not 

4 claim a deduction or credit under any other provision of 

5 this title with respect to the expenses under subsection (a). 

6 ‘‘(d) EXEMPTION FROM REPORTING REQUIRE7 MENTS.—Section 6041 shall not apply with respect to re8 imbursements excluded from income under subsection 

9 (a).’’

10 (b) CLERICAL AMENDMENT.—The table of sections 

11 for part III of subchapter B of chapter 1 is amended by 

12 inserting after the item relating to section 139 and insert13 ing the following new item:

‘‘Sec. 139A. Mileage reimbursements to charitable volunteers.’’.

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

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 TITLE II—IMPROVE OVERSIGHT 

18 OF TAX-EXEMPT ORGANIZA19 TIONS 

20 SEC. 201. DISCLOSURE OF WRITTEN DETERMINATIONS. 

21 (a) IN GENERAL.—Section 6110(l) (relating to sec22 tion not to apply) is amended by striking all matter before 

23 subparagraph (A) of paragraph (2) and inserting the fol24 lowing: 

25 ‘‘(l) SECTION NOT TO APPLY.—
43

•S 256 IS 

1 ‘‘(1) IN GENERAL.—This section shall not apply 

2 to any matter to which section 6104 or 6105 ap3 plies, except that this section shall apply to any writ4 ten determination and related background file docu5 ment relating to an organization described under 

6 subsection (c) or (d) of section 501 (including any 

7 written determination denying an organization tax8 exempt status under such subsection) or a political 

9 organization described in section 527 which is not 

10 required to be disclosed by section 6104(a)(1)(A). 

11 ‘‘(2) ADDITIONAL MATTERS.—This section shall 

12 not apply to any—’’. 

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

14 this section shall apply to written determinations issued 

15 after the date of the enactment of this Act. 

16 SEC. 202. DISCLOSURE OF INTERNET WEB SITE AND NAME 

17 UNDER WHICH ORGANIZATION DOES BUSI18 NESS. 

19 (a) IN GENERAL.—Section 6033 (relating to returns 

20 by exempt organizations) is amended by redesignating 

21 subsection (h) as subsection (i) and by inserting after sub22 section (g) the following new subsection: 

23 ‘‘(h) DISCLOSURE OF NAME UNDER WHICH ORGANI24 ZATION DOES BUSINESS AND ITS INTERNET WEB

25 SITE.—Any organization which is subject to the require-
44

•S 256 IS 

1 ments of subsection (a) shall include on the return re2 quired under subsection (a)—

3 ‘‘(1) any name under which such organization 

4 operates or does business, and 

5 ‘‘(2) the Internet web site address (if any) of 

6 such organization.’’. 

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

8 this section shall apply to returns filed after December 31, 

9 2003. 

10 SEC. 203. MODIFICATION TO REPORTING CAPITAL TRANS11 ACTIONS. 

12 (a) REQUIREMENT OF SUMMARY REPORT.—Section 

13 6033(c) (relating to additional provisions relating to pri14 vate foundations) is amended by adding at the end the 

15 following new sentence: ‘‘Any information included in an 

16 annual return regarding the gain or loss from the sale or 

17 other disposition of property which is required to be fur18 nished in order to calculate the tax on net investment in19 come shall also be reported in summary form with a notice 

20 that detailed information is available upon request by the 

21 public.’’. 

22 (b) DISCLOSURE REQUIREMENT.—Section 6104(b) 

23 (relating to inspection of annual information returns), as 

24 amended by this Act, is amended by adding at the end 

25 the following new sentences: ‘‘With respect to any private
45

•S 256 IS 

1 foundation (as defined in section 509(a)), any information 

2 regarding the gain or loss from the sale or other disposi3 tion of property which is required to be furnished in order 

4 to calculate the tax on net investment income but which 

5 is not in summary form is not required to be made avail6 able to the public under this subsection except upon the 

7 explicit request by a member of the public to the Sec8 retary.’’. 

9 (c) PUBLIC INSPECTION REQUIREMENT.—Section 

10 6104(d) (relating to public inspection of certain annual 

11 returns, applications for exemptions, and notices of sta12 tus) is amended by adding at the end the following new 

13 paragraph: 

14 ‘‘(9) APPLICATION TO PRIVATE FOUNDATION

15 CAPITAL TRANSACTION INFORMATION.—With re16 spect to any private foundation (as defined in sec17 tion 509(a)), any information regarding the gain or 

18 loss from the sale or other disposition of property 

19 which is required to be furnished in order to cal20 culate the tax on net investment income but which 

21 is not in summary form is not required to be made 

22 available to the public under this subsection except 

23 upon the explicit request by a member of the public 

24 to the private foundation in the form and manner of 

25 a request described in paragraph (1)(B).’’. 
46

•S 256 IS 

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

2 this section shall apply to returns filed after December 31, 

3 2003. 

4 SEC. 204. DISCLOSURE THAT FORM 990 IS PUBLICLY AVAIL5 ABLE. 

6 (a) IN GENERAL.—The Commissioner of the Internal 

7 Revenue shall notify the public in appropriate publications 

8 or other materials of the extent to which an exempt orga9 nization’s Form 990, Form 990–EZ, or Form 990–PF is 

10 publicly available. 

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

12 this section shall apply to publications or other materials 

13 issued or revised after the date of the enactment of this 

14 Act. 

15 SEC. 205. DISCLOSURE TO STATE OFFICIALS OF PROPOSED 

16 ACTIONS RELATED TO SECTION 501(c) ORGA17 NIZATIONS. 

18 (a) IN GENERAL.—Subsection (c) of section 6104 is 

19 amended by striking paragraph (2) and inserting the fol20 lowing new paragraphs: 

21 ‘‘(2) DISCLOSURE OF PROPOSED ACTIONS RE22 LATED TO CHARITABLE ORGANIZATIONS.—

23 ‘‘(A) SPECIFIC NOTIFICATIONS.—In the 

24 case of an organization to which paragraph (1) 
47

•S 256 IS 

1 applies, the Secretary may disclose to the ap2 propriate State officer—

3 ‘‘(i) a notice of proposed refusal to 

4 recognize such organization as an organi5 zation described in section 501(c)(3) or a 

6 notice of proposed revocation of such orga7 nization’s recognition as an organization 

8 exempt from taxation, 

9 ‘‘(ii) the issuance of a letter of pro10 posed deficiency of tax imposed under sec11 tion 507 or chapter 41 or 42, and 

12 ‘‘(iii) the names, addresses, and tax13 payer identification numbers of organiza14 tions which have applied for recognition as 

15 organizations described in section 

16 501(c)(3). 

17 ‘‘(B) ADDITIONAL DISCLOSURES.—Returns 

18 and return information of organizations with 

19 respect to which information is disclosed under 

20 subparagraph (A) may be made available for in21 spection by or disclosed to an appropriate State 

22 officer. 

23 ‘‘(C) PROCEDURES FOR DISCLOSURE.—In24 formation may be inspected or disclosed under 

25 subparagraph (A) or (B) only—
48

•S 256 IS 

1 ‘‘(i) upon written request by an ap2 propriate State officer, and 

3 ‘‘(ii) for the purpose of, and only to 

4 the extent necessary in, the administration 

5 of State laws regulating such organiza6 tions. 

7 Such information may only be inspected by or 

8 disclosed to representatives of the appropriate 

9 State officer designated as the individuals who 

10 are to inspect or to receive the returns or re11 turn information under this paragraph on be12 half of such officer. Such representatives shall 

13 not include any contractor or agent. 

14 ‘‘(D) DISCLOSURES OTHER THAN BY RE15 QUEST.—The Secretary may make available for 

16 inspection or disclose returns and return infor17 mation of an organization to which paragraph 

18 (1) applies to an appropriate State officer of 

19 any State if the Secretary determines that such 

20 inspection or disclosure may facilitate the reso21 lution of Federal or State issues relating to the 

22 tax-exempt status of such organization. 

23 ‘‘(3) DISCLOSURE WITH RESPECT TO CERTAIN

24 OTHER EXEMPT ORGANIZATIONS.—Upon written re25 quest by an appropriate State officer, the Secretary 
49

•S 256 IS 

1 may make available for inspection or disclosure re2 turns and return information of an organization de3 scribed in paragraph (2), (4), (6), (7), (8), (10), or 

4 (13) of section 501(c) for the purpose of, and to the 

5 extent necessary in, the administration of State laws 

6 regulating the solicitation or administration of the 

7 charitable funds or charitable assets of such organi8 zations. Such information may be inspected only by 

9 or disclosed only to representatives of the appro10 priate State officer designated as the individuals who 

11 are to inspect or to receive the returns or return in12 formation under this paragraph on behalf of such of13 ficer. Such representatives shall not include any con14 tractor or agent. 

15 ‘‘(4) USE IN CIVIL JUDICIAL AND ADMINISTRA16 TIVE PROCEEDINGS.—Returns and return informa17 tion disclosed pursuant to this subsection may be 

18 disclosed in civil administrative and civil judicial pro19 ceedings pertaining to the enforcement of State laws 

20 regulating such organizations in a manner pre21 scribed by the Secretary similar to that for tax ad22 ministration proceedings under section 6103(h)(4). 

23 ‘‘(5) NO DISCLOSURE IF IMPAIRMENT.—Re24 turns and return information shall not be disclosed 

25 under this subsection, or in any proceeding described
50

•S 256 IS 

1 in paragraph (4), to the extent that the Secretary 

2 determines that such disclosure would seriously im3 pair Federal tax administration. 

4 ‘‘(6) DEFINITIONS.—For purposes of this sub5 section—

6 ‘‘(A) RETURN AND RETURN INFORMA7 TION.—The terms ‘return’ and ‘return informa8 tion’ have the respective meanings given to such 

9 terms by section 6103(b). 

10 ‘‘(B) APPROPRIATE STATE OFFICER.—The 

11 term ‘appropriate State officer’ means—

12 ‘‘(i) the State attorney general, 

13 ‘‘(ii) in the case of an organization to 

14 which paragraph (1) applies, any other 

15 State official charged with overseeing orga16 nizations of the type described in section 

17 501(c)(3), and 

18 ‘‘(iii) in the case of an organization to 

19 which paragraph (3) applies, the head of 

20 an agency designated by the State attorney 

21 general as having primary responsibility 

22 for overseeing the solicitation of funds for 

23 charitable purposes.’’. 

24 (b) CONFORMING AMENDMENTS.—
51

•S 256 IS 

1 (1) Subsection (a) of section 6103 is amend2 ed—

3 (A) by inserting ‘‘or any appropriate State 

4 officer who has or had access to returns or re5 turn information under section 6104(c)’’ after 

6 ‘‘this section’’ in paragraph (2), and 

7 (B) by striking ‘‘or subsection (n)’’ in 

8 paragraph (3) and inserting ‘‘subsection (n), or 

9 section 6104(c)’’. 

10 (2) Subparagraph (A) of section 6103(p)(3) is 

11 amended by inserting ‘‘and section 6104(c)’’ after 

12 ‘‘section’’ in the first sentence. 

13 (3) Paragraph (4) of section 6103(p) is amend14 ed—

15 (A) in the matter preceding subparagraph 

16 (A), by striking ‘‘(16) or any other person de17 scribed in subsection (l)(16)’’ and inserting 

18 ‘‘(16), any other person described in subsection 

19 (l)(16), or any appropriate State officer (as de20 fined in section 6104(c))’’, and 

21 (B) in subparagraph (F), by striking ‘‘or 

22 any other person described in subsection 

23 (l)(16)’’ and inserting ‘‘any other person de24 scribed in subsection (l)(16), or any appropriate 

25 State officer (as defined in section 6104(c))’’. 
52

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1 (4) The heading for paragraph (1) of section 

2 6104(c) is amended by inserting ‘‘FOR CHARITABLE

3 ORGANIZATIONS’’. 

4 (5) Paragraph (2) of section 7213(a) is amend5 ed by inserting ‘‘or under section 6104(c)’’ after 

6 ‘‘6103’’. 

7 (6) Paragraph (2) of section 7213A(a) is 

8 amended by inserting ‘‘or 6104(c)’’ after ‘‘6103’’. 

9 (7) Paragraph (2) of section 7431(a) is amend10 ed by inserting ‘‘(including any disclosure in viola11 tion of section 6104(c))’’ after ‘‘6103’’. 

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

13 this section shall take effect on the date of the enactment 

14 of this Act but shall not apply to requests made before 

15 such date.

16 SEC. 206. EXPANSION OF PENALTIES TO PREPARERS OF 

17 FORM 990. 

18 (a) IN GENERAL.—Section 6695 (relating to other 

19 assessable penalties with respect to the preparation of in20 come tax returns for other persons) is amended by adding 

21 at the end the following new subsections: 

22 ‘‘(h) CERTAIN OMISSIONS AND MISREPRESENTA23 TIONS.—

24 ‘‘(1) IN GENERAL.—Any person who prepares 

25 for compensation any return under section 6033 who 
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1 omits or misrepresents any information with respect 

2 to such return which was known or should have been 

3 known by such person shall pay a penalty of $250 

4 with respect to such return. 

5 ‘‘(2) EXCEPTION FOR MINOR, INADVERTENT

6 OMISSIONS.—Paragraph (1) shall not apply to 

7 minor, inadvertent omissions. 

8 ‘‘(3) RULES FOR DETERMINING RETURN PRE9 PARER.—For purposes of this subsection and sub10 section (i), any reference to a person who prepares 

11 for compensation a return under section 6033—

12 ‘‘(A) shall include any person who employs 

13 1 or more persons to prepare for compensation 

14 a return under section 6033, and 

15 ‘‘(B) shall not include any person who 

16 would be described in clause (i), (ii), (iii), or 

17 (iv) of section 7701(a)(36)(B) if such section 

18 referred to a return under section 6033. 

19 ‘‘(i) WILLFUL OR RECKLESS CONDUCT.—

20 ‘‘(1) IN GENERAL.—Any person who prepares 

21 for compensation any return under section 6033 who 

22 recklessly or intentionally misrepresents any infor23 mation or recklessly or intentionally disregards any 

24 rule or regulation with respect to such return shall 

25 pay a penalty of $1,000 with respect to such return. 
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1 ‘‘(2) COORDINATION WITH OTHER PEN2 ALTIES.—With respect to any return, the amount of 

3 the penalty payable by any person by reason of para4 graph (1) shall be reduced by the amount of the 

5 penalty paid by such person by reason of subsection 

6 (h) or section 6694.’’. 

7 (b) CONFORMING AMENDMENTS.—

8 (1) The heading for section 6695 is amended by 

9 inserting ‘‘AND OTHER’’ after ‘‘INCOME TAX’’. 

10 (2) The item relating to section 6695 in the 

11 table of sections for part I of subchapter B of chap12 ter 68 is amended by inserting ‘‘and other’’ after 

13 ‘‘income tax’’. 

14 (c) EFFECTIVE DATE.—The amendment made by 

15 this section shall apply with respect to documents pre16 pared after the date of the enactment of this Act. 

17 SEC. 207. NOTIFICATION REQUIREMENT FOR ENTITIES NOT 

18 CURRENTLY REQUIRED TO FILE. 

19 (a) IN GENERAL.—Section 6033 (relating to returns 

20 by exempt organizations), as amended by section 202(a), 

21 is amended by redesignating subsection (i) as subsection 

22 (j) and by inserting after subsection (h) the following new 

23 subsection: 

24 ‘‘(i) ADDITIONAL NOTIFICATION REQUIREMENTS.—
55

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1 ‘‘(1) IN GENERAL.—Any organization the gross 

2 receipts of which in any taxable year result in such 

3 organization being referred to in subsection 

4 (a)(2)(A)(ii) or (a)(2)(B)—

5 ‘‘(A) shall furnish annually information, at 

6 such time and in such manner as the Secretary 

7 may by forms or regulations prescribe, setting 

8 forth—

9 ‘‘(i) the legal name of the organiza10 tion, 

11 ‘‘(ii) any name under which such or12 ganization operates or does business, 

13 ‘‘(iii) the organization’s mailing ad14 dress and Internet web site address (if 

15 any), 

16 ‘‘(iv) the organization’s taxpayer iden17 tification number, 

18 ‘‘(v) the name and address of a prin19 cipal officer, and 

20 ‘‘(vi) evidence of the continuing basis 

21 for the organization’s exemption from the 

22 filing requirements under subsection 

23 (a)(1), and 
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1 ‘‘(B) upon the termination of the existence 

2 of the organization, shall furnish notice of such 

3 termination. 

4 ‘‘(2) PENALTY FOR FAILURE TO NOTIFY.—

5 ‘‘(A) IN GENERAL.—If an organization de6 scribed in paragraph (1) fails to file 3 consecu7 tive annual notices required under such para8 graph, such organization’s status as an organi9 zation exempt from tax under section 501(a) 

10 shall be considered revoked on and after the 

11 date set by the Secretary for the filing of the 

12 third annual notice. The Secretary shall publish 

13 and maintain a list of organizations the status 

14 of which is so revoked. 

15 ‘‘(B) RETROACTIVE REINSTATEMENT IF

16 REASONABLE CAUSE SHOWN FOR FAILURE.—If 

17 upon reapplication for status as an organization 

18 exempt from tax under section 501(a), an orga19 nization described in subparagraph (A) can 

20 show to the satisfaction of the Secretary evi21 dence of reasonable cause for the failure de22 scribed in such subparagraph, the organiza23 tion’s status shall be effective from the date of 

24 the revocation under such subparagraph.’’. 
57

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1 (b) NO DECLARATORY JUDGMENT RELIEF.—Section 

2 7428(b) (relating to limitations) is amended by adding at 

3 the end the following new paragraph: 

4 ‘‘(4) NONAPPLICATION FOR CERTAIN REVOCA5 TIONS.—No action may be brought under this sec6 tion with respect to any revocation of status de7 scribed in section 6033(i)(2)(A).’’. 

8 (c) NO INSPECTION REQUIREMENT.—Section 

9 6104(b) (relating to inspection of annual information re10 turns) is amended by inserting ‘‘(other than subsection (i) 

11 thereof)’’ after ‘‘6033’’. 

12 (d) NO DISCLOSURE REQUIREMENT.—Section 

13 6104(d)(3) (relating to exceptions from disclosure require14 ments) is amended by redesignating subparagraph (B) as 

15 subparagraph (C) and by inserting after subparagraph (A) 

16 the following new subparagraph: 

17 ‘‘(B) NONDISCLOSURE OF ANNUAL NO18 TICES.—Paragraph (1) shall not require the 

19 disclosure of any notice required under section 

20 6033(i)(1).’’. 

21 (e) NO MONETARY PENALTY FOR FAILURE TO NO22 TIFY.—Section 6652(c)(1) (relating to annual returns 

23 under section 6033 or 6012(a)(6)) is amended by adding 

24 at the end the following new subparagraph: 
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•S 256 IS 

1 ‘‘(E) NO PENALTY FOR CERTAIN ANNUAL

2 NOTICES.—This paragraph shall not apply with 

3 respect to any notice required under section 

4 6033(i)(1).’’. 

5 (f) NOTICE OF REQUIREMENT BY SECRETARY.—The 

6 Secretary of the Treasury shall notify in a timely manner 

7 every organization described in section 6033(i)(1) of the 

8 Internal Revenue Code of 1986 (as added by this section) 

9 of the requirement under such section 6033(i)(1)—

10 (1) by mail, in the case of any organization the 

11 identity and address of which is included in the list 

12 of exempt organizations maintained by the Sec13 retary, and 

14 (2) by Internet or other means of outreach, in 

15 the case of any other organization. 

16 (g) EFFECTIVE DATE.—The amendments made by 

17 this section shall apply to notices with respect to annual 

18 periods beginning after 2003. 

19 SEC. 208. SUSPENSION OF TAX-EXEMPT STATUS OF TER20 RORIST ORGANIZATIONS. 

21 (a) IN GENERAL.—Section 501 of the Internal Rev22 enue Code of 1986 (relating to exemption from tax on cor23 porations, certain trusts, etc.) is amended by redesig24 nating subsection (p) as subsection (q) and by inserting 

25 after subsection (o) the following new subsection: 
59

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1 ‘‘(p) SUSPENSION OF TAX-EXEMPT STATUS OF TER2 RORIST ORGANIZATIONS.—

3 ‘‘(1) IN GENERAL.—The exemption from tax 

4 under subsection (a) with respect to any organiza5 tion described in paragraph (2), and the eligibility of 

6 any organization described in paragraph (2) to apply 

7 for recognition of exemption under subsection (a), 

8 shall be suspended during the period described in 

9 paragraph (3). 

10 ‘‘(2) TERRORIST ORGANIZATIONS.—An organi11 zation is described in this paragraph if such organi12 zation is designated or otherwise individually identi13 fied— 

14 ‘‘(A) under section 212(a)(3)(B)(vi)(II) or 

15 219 of the Immigration and Nationality Act as 

16 a terrorist organization or foreign terrorist or17 ganization, 

18 ‘‘(B) in or pursuant to an Executive order 

19 which is related to terrorism and issued under 

20 the authority of the International Emergency 

21 Economic Powers Act or section 5 of the 

22 United Nations Participation Act of 1945 for 

23 the purpose of imposing on such organization 

24 an economic or other sanction, or
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1 ‘‘(C) in or pursuant to an Executive order 

2 issued under the authority of any Federal law 

3 if—

4 ‘‘(i) the organization is designated or 

5 otherwise individually identified in or pur6 suant to such Executive order as sup7 porting or engaging in terrorist activity (as 

8 defined in section 212(a)(3)(B) of the Im9 migration and Nationality Act) or sup10 porting terrorism (as defined in section 

11 140(d)(2) of the Foreign Relations Author12 ization Act, Fiscal Years 1988 and 1989); 

13 and 

14 ‘‘(ii) such Executive order refers to 

15 this subsection. 

16 ‘‘(3) PERIOD OF SUSPENSION.—With respect to 

17 any organization described in paragraph (2), the pe18 riod of suspension—

19 ‘‘(A) begins on the date of the first publi20 cation of a designation or identification de21 scribed in paragraph (2) with respect to such 

22 organization, and 

23 ‘‘(B) ends on the first date that all des24 ignations and identifications described in para25 graph (2) with respect to such organization are 
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•S 256 IS 

1 rescinded pursuant to the law or Executive 

2 order under which such designation or identi3 fication was made. 

4 ‘‘(4) DENIAL OF DEDUCTION.—No deduction 

5 shall be allowed under section 170, 545(b)(2), 

6 556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 for 

7 any contribution to an organization described in 

8 paragraph (2) during the period described in para9 graph (3). 

10 ‘‘(5) DENIAL OF ADMINISTRATIVE OR JUDICIAL

11 CHALLENGE OF SUSPENSION OR DENIAL OF DEDUC12 TION.—Notwithstanding section 7428 or any other 

13 provision of law, no organization or other person 

14 may challenge a suspension under paragraph (1), a 

15 designation or identification described in paragraph 

16 (2), the period of suspension described in paragraph 

17 (3), or a denial of a deduction under paragraph (4) 

18 in any administrative or judicial proceeding relating 

19 to the Federal tax liability of such organization or 

20 other person. 

21 ‘‘(6) ERRONEOUS DESIGNATION.—

22 ‘‘(A) IN GENERAL.—If—

23 ‘‘(i) the tax exemption of any organi24 zation described in paragraph (2) is sus25 pended under paragraph (1), 
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1 ‘‘(ii) each designation and identifica2 tion described in paragraph (2) which has 

3 been made with respect to such organiza4 tion is determined to be erroneous pursu5 ant to the law or Executive order under 

6 which such designation or identification 

7 was made, and 

8 ‘‘(iii) the erroneous designations and 

9 identifications result in an overpayment of 

10 income tax for any taxable year by such 

11 organization, 

12 credit or refund (with interest) with respect to 

13 such overpayment shall be made. 

14 ‘‘(B) WAIVER OF LIMITATIONS.—If the 

15 credit or refund of any overpayment of tax de16 scribed in subparagraph (A)(iii) is prevented at 

17 any time by the operation of any law or rule of 

18 law (including res judicata), such credit or re19 fund may nevertheless be allowed or made if the 

20 claim therefor is filed before the close of the 1-

21 year period beginning on the date of the last 

22 determination described in subparagraph 

23 (A)(ii). 

24 ‘‘(7) NOTICE OF SUSPENSIONS.—If the tax ex25 emption of any organization is suspended under this 
63

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1 subsection, the Internal Revenue Service shall up2 date the listings of tax-exempt organizations and 

3 shall publish appropriate notice to taxpayers of such 

4 suspension and of the fact that contributions to such 

5 organization are not deductible during the period of 

6 such suspension.’’. 

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

8 this section shall take effect on the date of the enactment 

9 of this Act. 

10 TITLE III—OTHER CHARITABLE 

11 AND EXEMPT ORGANIZATION 

12 PROVISIONS 

13 SEC. 301. MODIFICATION OF EXCISE TAX ON UNRELATED 

14 BUSINESS TAXABLE INCOME OF CHARITABLE 

15 REMAINDER TRUSTS. 

16 (a) IN GENERAL.—Subsection (c) of section 664 (re17 lating to exemption from income taxes) is amended to read 

18 as follows: 

19 ‘‘(c) TAXATION OF TRUSTS.—

20 ‘‘(1) INCOME TAX.—A charitable remainder an21 nuity trust and a charitable remainder unitrust 

22 shall, for any taxable year, not be subject to any tax 

23 imposed by this subtitle. 

24 ‘‘(2) EXCISE TAX.—
64

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1 ‘‘(A) IN GENERAL.—In the case of a chari2 table remainder annuity trust or a charitable 

3 remainder unitrust which has unrelated busi4 ness taxable income (within the meaning of sec5 tion 512, determined as if part III of sub6 chapter F applied to such trust) for a taxable 

7 year, there is hereby imposed on such trust or 

8 unitrust an excise tax equal to the amount of 

9 such unrelated business taxable income. 

10 ‘‘(B) CERTAIN RULES TO APPLY.—The tax 

11 imposed by subparagraph (A) shall be treated 

12 as imposed by chapter 42 for purposes of this 

13 title other than subchapter E of chapter 42. 

14 ‘‘(C) TAX COURT PROCEEDINGS.—For pur15 poses of this paragraph, the references in sec16 tion 6212(c)(1) to section 4940 shall be deemed 

17 to include references to this paragraph.’’. 

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

19 this section shall apply to taxable years beginning after 

20 December 31, 2002. 

21 SEC. 302. MODIFICATIONS TO SECTION 512(b)(13). 

22 (a) IN GENERAL.—Paragraph (13) of section 512(b) 

23 (relating to special rules for certain amounts received from 

24 controlled entities) is amended by redesignating subpara-
65

•S 256 IS 

1 graph (E) as subparagraph (F) and by inserting after sub2 paragraph (D) the following new subparagraph: 

3 ‘‘(E) PARAGRAPH TO APPLY ONLY TO EX4 CESS PAYMENTS.—

5 ‘‘(i) IN GENERAL.—Subparagraph (A) 

6 shall apply only to the portion of a speci7 fied payment received or accrued by the 

8 controlling organization that exceeds the 

9 amount which would have been paid or ac10 crued if such payment met the require11 ments prescribed under section 482. 

12 ‘‘(ii) ADDITION TO TAX FOR VALU13 ATION MISSTATEMENTS.—The tax imposed 

14 by this chapter on the controlling organiza15 tion shall be increased by an amount equal 

16 to 20 percent of the larger of—

17 ‘‘(I) such excess determined with18 out regard to any amendment or sup19 plement to a return of tax, or 

20 ‘‘(II) such excess determined 

21 with regard to all such amendments 

22 and supplements.’’. 

23 (b) EFFECTIVE DATE.—
66

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1 (1) IN GENERAL.—The amendment made by 

2 this section shall apply to payments received or ac3 crued after December 31, 2000. 

4 (2) PAYMENTS SUBJECT TO BINDING CONTRACT

5 TRANSITION RULE.—If the amendments made by 

6 section 1041 of the Taxpayer Relief Act of 1997 did 

7 not apply to any amount received or accrued in the 

8 first 2 taxable years beginning on or after the date 

9 of the enactment of the Taxpayer Relief Act of 1997 

10 under any contract described in subsection (b)(2) of 

11 such section, such amendments also shall not apply 

12 to amounts received or accrued under such contract 

13 before January 1, 2001. 

14 SEC. 303. SIMPLIFICATION OF LOBBYING EXPENDITURE 

15 LIMITATION. 

16 (a) REPEAL OF GRASSROOTS EXPENDITURE

17 LIMIT.—Paragraph (1) of section 501(h) (relating to ex18 penditures by public charities to influence legislation) is 

19 amended to read as follows: 

20 ‘‘(1) GENERAL RULE.—In the case of an orga21 nization to which this subsection applies, exemption 

22 from taxation under subsection (a) shall be denied 

23 because a substantial part of the activities of such 

24 organization consists of carrying on propaganda, or 

25 otherwise attempting, to influence legislation, but 
67

•S 256 IS 

1 only if such organization normally makes lobbying 

2 expenditures in excess of the lobbying ceiling amount 

3 for such organization for each taxable year.’’. 

4 (b) EXCESS LOBBYING EXPENDITURES.—Section 

5 4911(b) is amended to read as follows: 

6 ‘‘(b) EXCESS LOBBYING EXPENDITURES.—For pur7 poses of this section, the term ‘excess lobbying expendi8 tures’ means, for a taxable year, the amount by which the 

9 lobbying expenditures made by the organization during the 

10 taxable year exceed the lobbying nontaxable amount for 

11 such organization for such taxable year.’’. 

12 (c) CONFORMING AMENDMENTS.—

13 (1) Section 501(h)(2) is amended by striking 

14 subparagraphs (C) and (D). 

15 (2) Section 4911(c) is amended by striking 

16 paragraphs (3) and (4). 

17 (3) Paragraph (1)(A) of section 4911(f) is 

18 amended by striking ‘‘limits of section 501(h)(1) 

19 have’’ and inserting ‘‘limit of section 501(h)(1) 

20 has’’. 

21 (4) Paragraph (1)(C) of section 4911(f) is 

22 amended by striking ‘‘limits of section 501(h)(1) 

23 are’’ and inserting ‘‘limit of section 501(h)(1) is’’. 

24 (5) Paragraphs (4)(A) and (4)(B) of section 

25 4911(f) are each amended by striking ‘‘limits of sec-
68

•S 256 IS 

1 tion 501(h)(1)’’ and inserting ‘‘limit of section 

2 501(h)(1)’’. 

3 (6) Paragraph (8) of section 6033(b) (relating 

4 to certain organizations described in section 

5 501(c)(3)) is amended by inserting ‘‘and’’ at the end 

6 of subparagraph (A) and by striking subparagraphs 

7 (C) and (D). 

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

9 this section shall apply to taxable years beginning after 

10 December 31, 2002. 

11 SEC. 304. EXPEDITED REVIEW PROCESS FOR CERTAIN TAX12 EXEMPTION APPLICATIONS. 

13 (a) IN GENERAL.—The Secretary of the Treasury or 

14 the Secretary’s delegate (in this section, referred to as the 

15 ‘‘Secretary’’) shall adopt procedures to expedite the con16 sideration of applications for exempt status under section 

17 501(c)(3) of the Internal Revenue Code of 1986 filed after 

18 December 31, 2003, by any organization that—

19 (1) is organized and operated for the primary 

20 purpose of providing social services; 

21 (2) is seeking a contract or grant under a Fed22 eral, State, or local program that provides funding 

23 for social services programs; 

24 (3) establishes that, under the terms and condi25 tions of the contract or grant program, an organiza-
69

•S 256 IS 

1 tion is required to obtain such exempt status before 

2 the organization is eligible to apply for a contract or 

3 grant; 

4 (4) includes with its exemption application a 

5 copy of its completed Federal, State, or local con6 tract or grant application; and 

7 (5) meets such other criteria as the Secretary 

8 deems appropriate for expedited consideration. 

9 The Secretary may prescribe other similar circumstances 

10 in which such organizations may be entitled to expedited 

11 consideration. 

12 (b) WAIVER OF APPLICATION FEE FOR EXEMPT

13 STATUS.—Any organization that meets the conditions de14 scribed in subsection (a) (without regard to paragraph (3) 

15 of that subsection) is entitled to a waiver of any fee for 

16 an application for exempt status under section 501(c)(3) 

17 of the Internal Revenue Code of 1986 if the organization 

18 certifies that the organization has had (or expects to have) 

19 average annual gross receipts of not more than $50,000 

20 during the preceding 4 years (or, in the case of an organi21 zation not in existence throughout the preceding 4 years, 

22 during such organization’s first 4 years). 

23 (c) SOCIAL SERVICES DEFINED.—For purposes of 

24 this section—
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1 (1) IN GENERAL.—The term ‘‘social services’’ 

2 means services directed at helping people in need, 

3 reducing poverty, improving outcomes of low-income 

4 children, revitalizing low-income communities, and 

5 empowering low-income families and low-income in6 dividuals to become self-sufficient, including—

7 (A) child care services, protective services 

8 for children and adults, services for children 

9 and adults in foster care, adoption services, 

10 services related to the management and mainte11 nance of the home, day care services for adults, 

12 and services to meet the special needs of chil13 dren, older individuals, and individuals with dis14 abilities (including physical, mental, or emo15 tional disabilities); 

16 (B) transportation services; 

17 (C) job training and related services, and 

18 employment services; 

19 (D) information, referral, and counseling 

20 services; 

21 (E) the preparation and delivery of meals, 

22 and services related to soup kitchens or food 

23 banks; 

24 (F) health support services; 

25 (G) literacy and mentoring programs;
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1 (H) services for the prevention and treat2 ment of juvenile delinquency and substance 

3 abuse, services for the prevention of crime and 

4 the provision of assistance to the victims and 

5 the families of criminal offenders, and services 

6 related to the intervention in, and prevention of, 

7 domestic violence; and 

8 (I) services related to the provision of as9 sistance for housing under Federal law. 

10 (2) EXCLUSIONS.—The term does not include a 

11 program having the purpose of delivering edu12 cational assistance under the Elementary and Sec13 ondary Education Act of 1965 (20 U.S.C. 6301 et 

14 seq.) or under the Higher Education Act of 1965 

15 (20 U.S.C. 1001 et seq.). 

16 SEC. 305. CLARIFICATION OF DEFINITION OF CHURCH TAX 

17 INQUIRY. 

18 Subsection (i) of section 7611 (relating to section not 

19 to apply to criminal investigations, etc.) is amended by 

20 striking ‘‘or’’ at the end of paragraph (4), by striking the 

21 period at the end of paragraph (5) and inserting ‘‘, or’’, 

22 and by inserting after paragraph (5) the following: 

23 ‘‘(6) information provided by the Secretary re24 lated to the standards for exemption from tax under 
72

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1 this title and the requirements under this title relat2 ing to unrelated business taxable income.’’. 

3 SEC. 306. EXPANSION OF DECLARATORY JUDGMENT REM4 EDY TO TAX-EXEMPT ORGANIZATIONS. 

5 (a) IN GENERAL.—Paragraph (1) of section 7428(a) 

6 (relating to creation of remedy) is amended—

7 (1) in subparagraph (B) by inserting after 

8 ‘‘509(a))’’ the following: ‘‘or as a private operating 

9 foundation (as defined in section 4942(j)(3))’’; and 

10 (2) by amending subparagraph (C) to read as 

11 follows: 

12 ‘‘(C) with respect to the initial qualifica13 tion or continuing qualification of an organiza14 tion as an organization described in section 

15 501(c) (other than paragraph (3)) or 501(d) 

16 which is exempt from tax under section 501(a), 

17 or’’. 

18 (b) COURT JURISDICTION.—Subsection (a) of section 

19 7428 is amended in the material following paragraph (2) 

20 by striking ‘‘United States Tax Court, the United States 

21 Claims Court, or the district court of the United States 

22 for the District of Columbia’’ and inserting the following: 

23 ‘‘United States Tax Court (in the case of any such deter24 mination or failure) or the United States Claims Court 

25 or the district court of the United States for the District 
73

•S 256 IS 

1 of Columbia (in the case of a determination or failure with 

2 respect to an issue referred to in subparagraph (A) or (B) 

3 of paragraph (1)),’’. 

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

5 this section shall apply to pleadings filed with respect to 

6 determinations (or requests for determinations) made 

7 after December 31, 2002. 

8 SEC. 307. DEFINITION OF CONVENTION OR ASSOCIATION 

9 OF CHURCHES. 

10 Section 7701 (relating to definitions) is amended by 

11 redesignating subsection (n) as subsection (o) and by in12 serting after subsection (m) the following new subsection: 

13 ‘‘(n) CONVENTION OR ASSOCIATION OF CHURCH14 ES.—For purposes of this title, any organization which is 

15 otherwise a convention or association of churches shall not 

16 fail to so qualify merely because the membership of such 

17 organization includes individuals as well as churches or be18 cause individuals have voting rights in such organiza19 tion.’’. 

20 SEC. 308. PAYMENTS BY CHARITABLE ORGANIZATIONS TO 

21 VICTIMS OF WAR ON TERRORISM. 

22 (a) IN GENERAL.—For purposes of the Internal Rev23 enue Code of 1986—

24 (1) payments made by an organization de25 scribed in section 501(c)(3) of such Code to a mem-
74

•S 256 IS 

1 ber of the Armed Forces of the United States, or to 

2 an individual of such member’s immediate family by 

3 reason of the death, injury, wounding, or illness of 

4 such member incurred as the result of the military 

5 response of the United States to the terrorist at6 tacks against the United States on September 11, 

7 2001, shall be treated as related to the purpose or 

8 function constituting the basis for such organiza9 tion’s exemption under section 501 of such Code if 

10 such payments are made using an objective formula 

11 which is consistently applied, and 

12 (2) in the case of a private foundation (as de13 fined in section 509 of such Code), any payment de14 scribed in paragraph (1) shall not be treated as 

15 made to a disqualified person for purposes of section 

16 4941 of such Code. 

17 (b) EFFECTIVE DATE.—This section shall apply to 

18 payments made after the date of the enactment of this 

19 Act and before September 11, 2004. 

20 SEC. 309. MODIFICATION OF SCHOLARSHIP FOUNDATION 

21 RULES. 

22 In applying the limitations on the percentage of 

23 scholarship grants which may be awarded after the date 

24 of the enactment of this Act, to children of current or 

25 former employees under Revenue Procedure 76–47, such 
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1 percentage shall be increased to 35 percent of the eligible 

2 applicants to be considered by the selection committee and 

3 to 20 percent of individuals eligible for the grants, but 

4 only if the foundation awarding the grants demonstrates 

5 that, in addition to meeting the other requirements of Rev6 enue Procedure 76–47, it provides a comparable number 

7 and aggregate amount of grants during the same program 

8 year to individuals who are not such employees, children 

9 or dependents of such employees, or affiliated with the em10 ployer of such employees. 

11 SEC. 310. TREATMENT OF CERTAIN HOSPITAL SUPPORT 

12 ORGANIZATIONS AS QUALIFIED ORGANIZA13 TIONS FOR PURPOSES OF DETERMINING AC14 QUISITION INDEBTEDNESS. 

15 (a) IN GENERAL.—Subparagraph (C) of section 

16 514(c)(9) (relating to real property acquired by a qualified 

17 organization) is amended by striking ‘‘or’’ at the end of 

18 clause (ii), by striking the period at the end of clause (iii) 

19 and inserting ‘‘; or’’, and by adding at the end the fol20 lowing new clause: 

21 ‘‘(iv) a qualified hospital support 

22 organization (as defined in subpara23 graph (I)).’’.
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1 (b) QUALIFIED HOSPITAL SUPPORT ORGANIZA2 TIONS.—Paragraph (9) of section 514(c) is amended by 

3 adding at the end the following new subparagraph: 

4 ‘‘(I) QUALIFIED HOSPITAL SUPPORT ORGA5 NIZATIONS.—For purposes of subparagraph 

6 (C)(iv), the term ‘qualified hospital support or7 ganization’ means, with respect to any eligible 

8 indebtedness (including any qualified refi9 nancing of such eligible indebtedness), a sup10 port organization (as defined in section 

11 509(a)(3)) which supports a hospital described 

12 in section 119(d)(4)(B) and with respect to 

13 which—

14 ‘‘(i) more than half of the organi15 zation’s assets (by value) at any time 

16 since its organization—

17 ‘‘(I) were acquired, directly 

18 or indirectly, by testamentary gift 

19 or devise, and 

20 ‘‘(II) consisted of real prop21 erty, and 

22 ‘‘(ii) the fair market value of the 

23 organization’s real estate acquired, di24 rectly or indirectly, by gift or devise, 

25 exceeded 25 percent of the fair mar-
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1 ket value of all investment assets held 

2 by the organization immediately prior 

3 to the time that the eligible indebted4 ness was incurred. 

5 For purposes of this subparagraph, the term 

6 ‘eligible indebtedness’ means indebtedness se7 cured by real property acquired by the organi8 zation, directly or indirectly, by gift or devise, 

9 the proceeds of which are used exclusively to ac10 quire any leasehold interest in such real prop11 erty or for improvements on, or repairs to, such 

12 real property. A determination under clauses (i) 

13 and (ii) of this subparagraph shall be made 

14 each time such an eligible indebtedness (or the 

15 qualified refinancing of such an eligible indebt16 edness) is incurred. For purposes of this sub17 paragraph, a refinancing of such an eligible in18 debtedness shall be considered qualified if such 

19 refinancing does not exceed the amount of the 

20 refinanced eligible indebtedness immediately be21 fore the refinancing.’’. 

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

23 this section shall apply to indebtedness incurred after De24 cember 31, 2003. 
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1 TITLE IV—SOCIAL SERVICES 

2 BLOCK GRANT 

3 SEC. 401. RESTORATION OF FUNDS FOR THE SOCIAL SERV4 ICES BLOCK GRANT. 

5 (a) FINDINGS.—Congress makes the following find6 ings: 

7 (1) On August 22, 1996, the Personal Respon8 sibility and Work Opportunity Reconciliation Act of 

9 1996 (Public Law 104–193; 110 Stat. 2105) was 

10 signed into law. 

11 (2) In enacting that law, Congress authorized 

12 $2,800,000,000 for fiscal year 2003 and each fiscal 

13 year thereafter to carry out the Social Services 

14 Block Grant program established under title XX of 

15 the Social Security Act (42 U.S.C. 1397 et seq.). 

16 (b) RESTORATION OF FUNDS.—Section 2003(c)(11) 

17 of the Social Security Act (42 U.S.C. 1397b(c)(11)) is 

18 amended by inserting ‘‘, except that, with respect to fiscal 

19 year 2003, the amount shall be $1,975,000,000, and with 

20 respect to fiscal year 2004, the amount shall be 

21 $2,800,000,000’’ after ‘‘thereafter.’’. 
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1 SEC. 402. RESTORATION OF AUTHORITY TO TRANSFER UP 

2 TO 10 PERCENT OF TANF FUNDS TO THE SO3 CIAL SERVICES BLOCK GRANT. 

4 (a) IN GENERAL.—Section 404(d)(2) of the Social 

5 Security Act (42 U.S.C. 604(d)(2)) is amended to read 

6 as follows: 

7 ‘‘(2) LIMITATION ON AMOUNT TRANSFERABLE

8 TO TITLE XX PROGRAMS.—A State may use not 

9 more than 10 percent of the amount of any grant 

10 made to the State under section 403(a) for a fiscal 

11 year to carry out State programs pursuant to title 

12 XX.’’. 

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

14 subsection (a) applies to amounts made available for fiscal 

15 year 2003 and each fiscal year thereafter. 

16 SEC. 403. REQUIREMENT TO SUBMIT ANNUAL REPORT ON 

17 STATE ACTIVITIES. 

18 (a) IN GENERAL.—Section 2006(c) of the Social Se19 curity Act (42 U.S.C. 1397e(c)) is amended by adding at 

20 the end the following: ‘‘The Secretary shall compile the 

21 information submitted by the States and submit that in22 formation to Congress on an annual basis.’’. 

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

24 subsection (a) applies to information submitted by States 

25 under section 2006 of the Social Security Act (42 U.S.C. 
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1 1397e) with respect to fiscal year 2002 and each fiscal 

2 year thereafter.

3 TITLE V—INDIVIDUAL 

4 DEVELOPMENT ACCOUNTS 

5 SEC. 501. SHORT TITLE. 

6 This title may be cited as the ‘‘Savings for Working 

7 Families Act of 2003’’.

8 SEC. 502. PURPOSES. 

9 The purposes of this title are to provide for the estab10 lishment of individual development account programs that 

11 will—

12 (1) provide individuals and families with limited 

13 means an opportunity to accumulate assets and to 

14 enter the financial mainstream, 

15 (2) promote education, homeownership, and the 

16 development of small businesses, 

17 (3) stabilize families and build communities, 

18 and 

19 (4) support continued United States economic 

20 expansion. 

21 SEC. 503. DEFINITIONS. 

22 As used in this title: 

23 (1) ELIGIBLE INDIVIDUAL.—
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1 (A) IN GENERAL.—The term ‘‘eligible indi2 vidual’’ means, with respect to any taxable year, 

3 an individual who—

4 (i) has attained the age of 18 but not 

5 the age of 61 as of the last day of such 

6 taxable year, 

7 (ii) is a citizen or lawful permanent 

8 resident (within the meaning of section 

9 7701(b)(6) of the Internal Revenue Code 

10 of 1986) of the United States as of the 

11 last day of such taxable year,

12 (iii) was not a student (as defined in 

13 section 151(c)(4) of such Code) for the im14 mediately preceding taxable year, 

15 (iv) is not an individual with respect 

16 to whom a deduction under section 151 of 

17 such Code is allowable to another taxpayer 

18 for a taxable year of the other taxpayer 

19 ending during the immediately preceding 

20 taxable year of the individual, 

21 (v) is not a taxpayer described in sub22 section (c), (d), or (e) of section 6402 of 

23 such Code for the immediately preceding 

24 taxable year, 
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1 (vi) is not a taxpayer described in sec2 tion 1(d) of such Code for the immediately 

3 preceding taxable year, and 

4 (vii) is a taxpayer the modified ad5 justed gross income of whom for the imme6 diately preceding taxable year does not ex7 ceed—

8 (I) $18,000, in the case of a tax9 payer described in section 1(c) of such 

10 Code, 

11 (II) $30,000, in the case of a 

12 taxpayer described in section 1(b) of 

13 such Code, and 

14 (III) $38,000, in the case of a 

15 taxpayer described in section 1(a) of 

16 such Code. 

17 (B) INFLATION ADJUSTMENT.—

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

19 taxable year beginning after 2004, each 

20 dollar amount referred to in subparagraph 

21 (A)(vii) shall be increased by an amount 

22 equal to—

23 (I) such dollar amount, multi24 plied by 
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1 (II) the cost-of-living adjustment 

2 determined under section (1)(f)(3) of 

3 the Internal Revenue Code of 1986 

4 for the calendar year in which the tax5 able year begins, by substituting 

6 ‘‘2003’’ for ‘‘1992’’. 

7 (ii) ROUNDING.—If any amount as 

8 adjusted under clause (i) is not a multiple 

9 of $50, such amount shall be rounded to 

10 the nearest multiple of $50. 

11 (C) MODIFIED ADJUSTED GROSS IN12 COME.—For purposes of subparagraph (A)(v), 

13 the term ‘‘modified adjusted gross income’’ 

14 means adjusted gross income—

15 (i) determined without regard to sec16 tions 86, 893, 911, 931, and 933 of the 

17 Internal Revenue Code of 1986, and 

18 (ii) increased by the amount of inter19 est received or accrued by the taxpayer 

20 during the taxable year which is exempt 

21 from tax. 

22 (2) INDIVIDUAL DEVELOPMENT ACCOUNT.—

23 The term ‘‘Individual Development Account’’ means 

24 an account established for an eligible individual as 

25 part of a qualified individual development account 
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1 program, but only if the written governing instru2 ment creating the account meets the following re3 quirements:

4 (A) The owner of the account is the indi5 vidual for whom the account was established. 

6 (B) No contribution will be accepted unless 

7 it is in cash, and, except in the case of any 

8 qualified rollover, contributions will not be ac9 cepted for the taxable year in excess of $1,500 

10 on behalf of any individual. 

11 (C) The trustee of the account is a quali12 fied financial institution. 

13 (D) The assets of the account will not be 

14 commingled with other property except in a 

15 common trust fund or common investment 

16 fund. 

17 (E) Except as provided in section 507(b), 

18 any amount in the account may be paid out 

19 only for the purpose of paying the qualified ex20 penses of the account owner. 

21 (3) PARALLEL ACCOUNT.—The term ‘‘parallel 

22 account’’ means a separate, parallel individual or 

23 pooled account for all matching funds and earnings 

24 dedicated to an Individual Development Account 

25 owner as part of a qualified individual development 
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1 account program, the trustee of which is a qualified 

2 financial institution. 

3 (4) QUALIFIED FINANCIAL INSTITUTION.—The 

4 term ‘‘qualified financial institution’’ means any per5 son authorized to be a trustee of any individual re6 tirement account under section 408(a)(2) of the In7 ternal Revenue Code of 1986. 

8 (5) QUALIFIED INDIVIDUAL DEVELOPMENT AC9 COUNT PROGRAM.—The term ‘‘qualified individual 

10 development account program’’ means a program es11 tablished upon approval of the Secretary under sec12 tion 504 after December 31, 2002, under which—

13 (A) Individual Development Accounts and 

14 parallel accounts are held in trust by a qualified 

15 financial institution, and 

16 (B) additional activities determined by the 

17 Secretary, in consultation with the Secretary of 

18 Health and Human Services, as necessary to re19 sponsibly develop and administer accounts, in20 cluding recruiting, providing financial education 

21 and other training to Account owners, and reg22 ular program monitoring, are carried out by the 

23 qualified financial institution. 

24 (6) QUALIFIED EXPENSE DISTRIBUTION.—
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1 (A) IN GENERAL.—The term ‘‘qualified ex2 pense distribution’’ means any amount paid (in3 cluding through electronic payments) or distrib4 uted out of an Individual Development Account 

5 or a parallel account established for an eligible 

6 individual if such amount—

7 (i) is used exclusively to pay the quali8 fied expenses of the Individual Develop9 ment Account owner or such owner’s 

10 spouse or dependents, 

11 (ii) is paid by the qualified financial 

12 institution—

13 (I) except as otherwise provided 

14 in this clause, directly to the unre15 lated third party to whom the amount 

16 is due, 

17 (II) in the case of any qualified 

18 rollover, directly to another Individual 

19 Development Account and parallel ac20 count, or 

21 (III) in the case of a qualified 

22 final distribution, directly to the 

23 spouse, dependent, or other named 

24 beneficiary of the deceased Account 

25 owner, and 
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1 (iii) is paid after the Account owner 

2 has completed a financial education course 

3 if required under section 505(b). 

4 (B) QUALIFIED EXPENSES.—

5 (i) IN GENERAL.—The term ‘‘qualified 

6 expenses’’ means any of the following ex7 penses approved by the qualified financial 

8 institution: 

9 (I) Qualified higher education ex10 penses. 

11 (II) Qualified first-time home12 buyer costs. 

13 (III) Qualified business capital14 ization or expansion costs. 

15 (IV) Qualified rollovers. 

16 (V) Qualified final distribution. 

17 (ii) QUALIFIED HIGHER EDUCATION

18 EXPENSES.—

19 (I) IN GENERAL.—The term 

20 ‘‘qualified higher education expenses’’ 

21 has the meaning given such term by 

22 section 529(e)(3) of the Internal Rev23 enue Code of 1986, determined by 

24 treating the Account owner, the own25 er’s spouse, or one or more of the 
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1 owner’s dependents as a designated 

2 beneficiary, and reduced as provided 

3 in section 25A(g)(2) of such Code. 

4 (II) COORDINATION WITH OTHER

5 BENEFITS.—The amount of expenses 

6 which may be taken into account for 

7 purposes of section 135, 529, or 530 

8 of such Code for any taxable year 

9 shall be reduced by the amount of any 

10 qualified higher education expenses 

11 taken into account as qualified ex12 pense distributions during such tax13 able year. 

14 (iii) QUALIFIED FIRST-TIME HOME15 BUYER COSTS.—The term ‘‘qualified first16 time homebuyer costs’’ means qualified ac17 quisition costs (as defined in section 

18 72(t)(8)(C) of the Internal Revenue Code 

19 of 1986) with respect to a principal resi20 dence (within the meaning of section 121 

21 of such Code) for a qualified first-time 

22 homebuyer (as defined in section 

23 72(t)(8)(D)(i) of such Code). 

24 (iv) QUALIFIED BUSINESS CAPITAL25 IZATION OR EXPANSION COSTS.—
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1 (I) IN GENERAL.—The term 

2 ‘‘qualified business capitalization or 

3 expansion costs’’ means qualified ex4 penditures for the capitalization or ex5 pansion of a qualified business pursu6 ant to a qualified business plan. 

7 (II) QUALIFIED EXPENDI8 TURES.—The term ‘‘qualified expendi9 tures’’ means expenditures normally 

10 associated with starting or expanding 

11 a business and included in a qualified 

12 business plan, including costs for cap13 ital, plant, and equipment, inventory 

14 expenses, and attorney and accounting 

15 fees. 

16 (III) QUALIFIED BUSINESS.—

17 The term ‘‘qualified business’’ means 

18 any business that does not contravene 

19 any law. 

20 (IV) QUALIFIED BUSINESS

21 PLAN.—The term ‘‘qualified business 

22 plan’’ means a business plan which 

23 has been approved by the qualified fi24 nancial institution and which meets
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1 such requirements as the Secretary 

2 may specify. 

3 (v) QUALIFIED ROLLOVERS.—The 

4 term ‘‘qualified rollover’’ means the com5 plete distribution of the amounts in an In6 dividual Development Account and parallel 

7 account to another Individual Development 

8 Account and parallel account established in 

9 another qualified financial institution for 

10 the benefit of the Account owner. 

11 (vi) QUALIFIED FINAL DISTRIBU12 TION.—The term ‘‘qualified final distribu13 tion’’ means, in the case of a deceased Ac14 count owner, the complete distribution of 

15 the amounts in the Individual Development 

16 Account and parallel account directly to 

17 the spouse, any dependent, or other named 

18 beneficiary of the deceased. 

19 (7) SECRETARY.—The term ‘‘Secretary’’ means 

20 the Secretary of the Treasury.

21 SEC. 504. STRUCTURE AND ADMINISTRATION OF QUALI22 FIED INDIVIDUAL DEVELOPMENT ACCOUNT 

23 PROGRAMS. 

24 (a) ESTABLISHMENT OF QUALIFIED INDIVIDUAL DE25 VELOPMENT ACCOUNT PROGRAMS.—Any qualified finan-
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1 cial institution may apply to the Secretary for approval 

2 to establish 1 or more qualified individual development ac3 count programs which meet the requirements of this title 

4 and for an allocation of the Individual Development Ac5 count limitation under section 45G(i)(3) of the Internal 

6 Revenue Code of 1986 with respect to such programs. 

7 (b) BASIC PROGRAM STRUCTURE.—

8 (1) IN GENERAL.—All qualified individual de9 velopment account programs shall consist of the fol10 lowing 2 components for each participant: 

11 (A) An Individual Development Account to 

12 which an eligible individual may contribute cash 

13 in accordance with section 505.

14 (B) A parallel account to which all match15 ing funds shall be deposited in accordance with 

16 section 506. 

17 (2) TAILORED IDA PROGRAMS.—A qualified fi18 nancial institution may tailor its qualified individual 

19 development account program to allow matching 

20 funds to be spent on 1 or more of the categories of 

21 qualified expenses. 

22 (3) NO FEES MAY BE CHARGED TO IDAS.—A 

23 qualified financial institution may not charge any 

24 fees to any Individual Development Account or par-
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1 allel account under a qualified individual develop2 ment account program. 

3 (c) COORDINATION WITH PUBLIC HOUSING AGENCY

4 INDIVIDUAL SAVINGS ACCOUNTS.—Section 3(e)(2) of the 

5 United States Housing Act of 1937 (42 U.S.C. 

6 1437a(e)(2)) is amended by inserting ‘‘or in any Indi7 vidual Development Account established under the Sav8 ings for Working Families Act of 2003’’ after ‘‘sub9 section’’.

10 (d) TAX TREATMENT OF PARALLEL ACCOUNTS.—

11 (1) IN GENERAL.—Chapter 77 (relating to mis12 cellaneous provisions) is amended by adding at the 

13 end the following new section: 

14 ‘‘SEC. 7525. TAX INCENTIVES FOR INDIVIDUAL DEVELOP15 MENT PARALLEL ACCOUNTS. 

16 ‘‘For purposes of this title—

17 ‘‘(1) any account described in section 

18 504(b)(1)(B) of the Savings for Working Families 

19 Act of 2003 shall be exempt from taxation, 

20 ‘‘(2) except as provided in section 45G, no item 

21 of income, expense, basis, gain, or loss with respect 

22 to such an account may be taken into account, and 

23 ‘‘(3) any amount withdrawn from such an ac24 count shall not be includible in gross income.’’. 
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1 (2) CONFORMING AMENDMENT.—The table of 

2 sections for chapter 77 is amended by adding at the 

3 end the following new item:

‘‘Sec. 7525. Tax incentives for individual development parallel accounts.’’.

4 (e) COORDINATION OF CERTAIN EXPENSES.—Section 

5 25A(g)(2) is amended by striking ‘‘and’’ at the end of sub6 paragraph (C), by striking the period at the end of sub7 paragraph (D) and inserting ‘‘, and’’, and by adding at 

8 the end the following new subparagraph: 

9 ‘‘(D) a qualified expense distribution with 

10 respect to qualified higher education expenses 

11 from an Individual Development Account or a 

12 parallel account under section 507(a) of the 

13 Savings for Working Families Act of 2003. 

14 SEC. 505. PROCEDURES FOR OPENING AND MAINTAINING 

15 AN INDIVIDUAL DEVELOPMENT ACCOUNT 

16 AND QUALIFYING FOR MATCHING FUNDS. 

17 (a) OPENING AN ACCOUNT.—An eligible individual 

18 may open an Individual Development Account with a 

19 qualified financial institution upon certification that such 

20 individual has never maintained any other Individual De21 velopment Account (other than an Individual Development 

22 Account to be terminated by a qualified rollover). 

23 (b) REQUIRED COMPLETION OF FINANCIAL EDU24 CATION COURSE.—
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1 (1) IN GENERAL.—Before becoming eligible to 

2 withdraw funds to pay for qualified expenses, owners 

3 of Individual Development Accounts must complete 

4 1 or more financial education courses specified in 

5 the qualified individual development account pro6 gram. 

7 (2) STANDARD AND APPLICABILITY OF

8 COURSE.—The Secretary, in consultation with rep9 resentatives of qualified individual development ac10 count programs and financial educators, shall not 

11 later than January 1, 2004, establish minimum 

12 quality standards for the contents of financial edu13 cation courses and providers of such courses de14 scribed in paragraph (1) and a protocol to exempt 

15 individuals from the requirement under paragraph 

16 (1) in the case of hardship, lack of need, the attain17 ment of age 65, or a qualified final distribution. 

18 (c) PROOF OF STATUS AS AN ELIGIBLE INDI19 VIDUAL.—Federal income tax forms for the immediately 

20 preceding taxable year and any other evidence of eligibility 

21 which may be required by a qualified financial institution 

22 shall be presented to such institution at the time of the 

23 establishment of the Individual Development Account and 

24 in any taxable year in which contributions are made to
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1 the Account to qualify for matching funds under section 

2 506(b)(1)(A). 

3 (d) SPECIAL RULE IN THE CASE OF MARRIED INDI4 VIDUALS.—For purposes of this title, if, with respect to 

5 any taxable year, 2 married individuals file a Federal joint 

6 income tax return, then not more than 1 of such individ7 uals may be treated as an eligible individual with respect 

8 to the succeeding taxable year.

9 SEC. 506. DEPOSITS BY QUALIFIED INDIVIDUAL DEVELOP10 MENT ACCOUNT PROGRAMS. 

11 (a) PARALLEL ACCOUNTS.—The qualified financial 

12 institution shall deposit all matching funds for each Indi13 vidual Development Account into a parallel account at a 

14 qualified financial institution. 

15 (b) REGULAR DEPOSITS OF MATCHING FUNDS.—

16 (1) IN GENERAL.—Subject to paragraph (2), 

17 the qualified financial institution shall deposit into 

18 the parallel account with respect to each eligible in19 dividual the following amounts: 

20 (A) A dollar-for-dollar match for the first 

21 $500 contributed by the eligible individual into 

22 an Individual Development Account with re23 spect to any taxable year of such individual. 
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1 (B) Any matching funds provided by State, 

2 local, or private sources in accordance with the 

3 matching ratio set by those sources.

4 (2) TIMING OF DEPOSITS.—A deposit of the 

5 amounts described in paragraph (1) shall be made 

6 into a parallel account—

7 (A) in the case of amounts described in 

8 paragraph (1)(A), not later than 30 days after 

9 the end of the calendar quarter during which 

10 the contribution described in such paragraph 

11 was made, and 

12 (B) in the case of amounts described in 

13 paragraph (1)(B), not later than 2 business 

14 days after such amounts were provided. 

15 (3) CROSS REFERENCE.—

For allowance of tax credit for Individual Development Account subsidies, including matching 

funds, see section 45G of the Internal Revenue Code 

of 1986.

16 (c) DEPOSIT OF MATCHING FUNDS INTO INDI17 VIDUAL DEVELOPMENT ACCOUNT OF INDIVIDUAL WHO

18 HAS ATTAINED AGE 65.—In the case of an Individual De19 velopment Account owner who attains the age of 65, the 

20 qualified financial institution shall deposit the funds in the 

21 parallel account with respect to such individual into the 

22 Individual Development Account of such individual on the 

23 later of—
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1 (1) the day which is the 1-year anniversary of 

2 the deposit of such funds in the parallel account, or 

3 (2) the first business day of the taxable year of 

4 such individual following the taxable year in which 

5 such individual attained age 65.

6 (d) UNIFORM ACCOUNTING REGULATIONS.—To en7 sure proper recordkeeping and determination of the tax 

8 credit under section 45G of the Internal Revenue Code 

9 of 1986, the Secretary shall prescribe regulations with re10 spect to accounting for matching funds in the parallel ac11 counts. 

12 (e) REGULAR REPORTING OF ACCOUNTS.—Any 

13 qualified financial institution shall report the balances in 

14 any Individual Development Account and parallel account 

15 of an individual on not less than an annual basis to such 

16 individual.

17 SEC. 507. WITHDRAWAL PROCEDURES. 

18 (a) WITHDRAWALS FOR QUALIFIED EXPENSES.—

19 (1) IN GENERAL.—An Individual Development 

20 Account owner may withdraw funds in order to pay 

21 qualified expense distributions from such individ22 ual’s—

23 (A) Individual Development Account, but 

24 only from funds which have been on deposit in 

25 such Account for at least 1 year, and 
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1 (B) parallel account, but only—

2 (i) from matching funds which have 

3 been on deposit in such parallel account 

4 for at least 1 year, 

5 (ii) from earnings in such parallel ac6 count, after all matching funds described 

7 in clause (i) have been withdrawn, and 

8 (iii) to the extent such withdrawal 

9 does not result in a remaining balance in 

10 such parallel account which is less than the 

11 remaining balance in the Individual Devel12 opment Account after such withdrawal. 

13 (2) PROCEDURE.—Upon receipt of a with14 drawal request which meets the requirements of 

15 paragraph (1), the qualified financial institution 

16 shall directly transfer the funds electronically to the 

17 distributees described in section 503(6)(A)(ii). If a 

18 distributee is not equipped to receive funds electroni19 cally, the qualified financial institution may issue 

20 such funds by paper check to the distributee. 

21 (b) WITHDRAWALS FOR NONQUALIFIED EX22 PENSES.—An Individual Development Account owner may 

23 withdraw any amount of funds from the Individual Devel24 opment Account for purposes other than to pay qualified 

25 expense distributions, but if, after such withdrawal, the 
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1 amount in the parallel account of such owner (excluding 

2 earnings on matching funds) exceeds the amount remain3 ing in such Individual Development Account, then such 

4 owner shall forfeit from the parallel account the lesser of 

5 such excess or the amount withdrawn. 

6 (c) WITHDRAWALS FROM ACCOUNTS OF NON7 ELIGIBLE INDIVIDUALS.—If the individual for whose ben8 efit an Individual Development Account is established 

9 ceases to be an eligible individual, such account shall re10 main an Individual Development Account, but such indi11 vidual shall not be eligible for any further matching funds 

12 under section 506(b)(1)(A) for contributions which are 

13 made to the Account during any taxable year when such 

14 individual is not an eligible individual. 

15 (d) EFFECT OF PLEDGING ACCOUNT AS SECU16 RITY.—If, during any taxable year of the individual for 

17 whose benefit an Individual Development Account is es18 tablished, that individual uses the Account, the individ19 ual’s parallel account, or any portion thereof as security 

20 for a loan, the portion so used shall be treated as a with21 drawal of such portion from the Individual Development 

22 Account for purposes other than to pay qualified expenses.
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1 SEC. 508. CERTIFICATION AND TERMINATION OF QUALI2 FIED INDIVIDUAL DEVELOPMENT ACCOUNT 

3 PROGRAMS. 

4 (a) CERTIFICATION PROCEDURES.—Upon estab5 lishing a qualified individual development account pro6 gram under section 504, a qualified financial institution 

7 shall certify to the Secretary at such time and in such 

8 manner as may be prescribed by the Secretary and accom9 panied by any documentation required by the Secretary, 

10 that—

11 (1) the accounts described in subparagraphs 

12 (A) and (B) of section 504(b)(1) are operating pur13 suant to all the provisions of this title, and 

14 (2) the qualified financial institution agrees to 

15 implement an information system necessary to mon16 itor the cost and outcomes of the qualified individual 

17 development account program. 

18 (b) AUTHORITY TO TERMINATE QUALIFIED IDA 

19 PROGRAM.—If the Secretary determines that a qualified 

20 financial institution under this title is not operating a 

21 qualified individual development account program in ac22 cordance with the requirements of this title (and has not 

23 implemented any corrective recommendations directed by 

24 the Secretary), the Secretary shall terminate such institu25 tion’s authority to conduct the program. If the Secretary 

26 is unable to identify a qualified financial institution to as-
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1 sume the authority to conduct such program, then any 

2 funds in a parallel account established for the benefit of 

3 any individual under such program shall be deposited into 

4 the Individual Development Account of such individual as 

5 of the first day of such termination. 

6 SEC. 509. REPORTING, MONITORING, AND EVALUATION. 

7 (a) RESPONSIBILITIES OF QUALIFIED FINANCIAL IN8 STITUTIONS.—

9 (1) IN GENERAL.—Each qualified financial in10 stitution that operates a qualified individual develop11 ment account program under section 504 shall re12 port annually to the Secretary within 90 days after 

13 the end of each calendar year on—

14 (A) the number of individuals making con15 tributions into Individual Development Ac16 counts and the amounts contributed,

17 (B) the amounts contributed into Indi18 vidual Development Accounts by eligible individ19 uals and the amounts deposited into parallel ac20 counts for matching funds, 

21 (C) the amounts withdrawn from Indi22 vidual Development Accounts and parallel ac23 counts, and the purposes for which such 

24 amounts were withdrawn, 
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1 (D) the balances remaining in Individual 

2 Development Accounts and parallel accounts, 

3 and 

4 (E) such other information needed to help 

5 the Secretary monitor the effectiveness of the 

6 qualified individual development account pro7 gram (provided in a non-individually-identifiable 

8 manner). 

9 (2) ADDITIONAL REPORTING REQUIREMENTS.—

10 Each qualified financial institution that operates a 

11 qualified individual development account program 

12 under section 504 shall report at such time and in 

13 such manner as the Secretary may prescribe any ad14 ditional information that the Secretary requires to 

15 be provided for purposes of administering and super16 vising the qualified individual development account 

17 program. This additional data may include, without 

18 limitation, identifying information about Individual 

19 Development Account owners, their Accounts, addi20 tions to the Accounts, and withdrawals from the Ac21 counts. 

22 (b) RESPONSIBILITIES OF THE SECRETARY.—

23 (1) MONITORING PROTOCOL.—Not later than 

24 12 months after the date of the enactment of this 

25 Act, the Secretary, in consultation with the Sec-
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1 retary of Health and Human Services, shall develop 

2 and implement a protocol and process to monitor the 

3 cost and outcomes of the qualified individual devel4 opment account programs established under section 

5 504.

6 (2) ANNUAL REPORTS.—For each year after 

7 2003, the Secretary shall submit a progress report 

8 to Congress on the status of such qualified indi9 vidual development account programs. Such report 

10 shall, to the extent data are available, include from 

11 a representative sample of qualified individual devel12 opment account programs information on—

13 (A) the characteristics of participants, in14 cluding age, gender, race or ethnicity, marital 

15 status, number of children, employment status, 

16 and monthly income, 

17 (B) deposits, withdrawals, balances, uses 

18 of Individual Development Accounts, and par19 ticipant characteristics, 

20 (C) the characteristics of qualified indi21 vidual development account programs, including 

22 match rate, economic education requirements, 

23 permissible uses of accounts, staffing of pro24 grams in full time employees, and the total 

25 costs of programs, and 
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1 (D) process information on program imple2 mentation and administration, especially on 

3 problems encountered and how problems were 

4 solved. 

5 (3) REAUTHORIZATION REPORT ON COST AND

6 OUTCOMES OF IDAS.—

7 (A) IN GENERAL.—Not later than July 1, 

8 2008, the Secretary of the Treasury shall sub9 mit a report to Congress and the chairmen and 

10 ranking members of the Committee on Finance, 

11 the Committee on Banking, Housing, and 

12 Urban Affairs, and the Committee on Health, 

13 Education, Labor, and Pensions of the Senate 

14 and the Committee on Ways and Means, the 

15 Committee on Banking and Financial Services, 

16 and the Committee on Education and the 

17 Workforce of the House of Representatives, in 

18 which the Secretary shall—

19 (i) summarize the previously sub20 mitted annual reports required under para21 graph (2), 

22 (ii) from a representative sample of 

23 qualified individual development account 

24 programs, include an analysis of—
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1 (I) the economic, social, and be2 havioral outcomes, 

3 (II) the changes in savings rates, 

4 asset holdings, and household debt, 

5 and overall changes in economic sta6 bility, 

7 (III) the changes in outlooks, at8 titudes, and behavior regarding sav9 ings strategies, investment, education, 

10 and family, 

11 (IV) the integration into the fi12 nancial mainstream, including de13 creased reliance on alternative finan14 cial services, and increase in acquisi15 tion of mainstream financial products, 

16 and 

17 (V) the involvement in civic af18 fairs, including neighborhood schools 

19 and associations, 

20 associated with participation in qualified 

21 individual development account programs, 

22 (iii) from a representative sample of 

23 qualified individual development account 

24 programs, include a comparison of out25 comes associated with such programs with 
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1 outcomes associated with other Federal 

2 Government social and economic develop3 ment programs, including asset building 

4 programs, and 

5 (iv) make recommendations regarding 

6 the reauthorization of the qualified indi7 vidual development account programs, in8 cluding—

9 (I) recommendations regarding 

10 reforms that will improve the cost and 

11 outcomes of the such programs, in12 cluding the ability to help low income 

13 families save and accumulate produc14 tive assets, 

15 (II) recommendations regarding 

16 the appropriate levels of subsidies to 

17 provide effective incentives to financial 

18 institutions and Account owners under 

19 such programs, and 

20 (III) recommendations regarding 

21 how such programs should be inte22 grated into other Federal poverty re23 duction, asset building, and commu24 nity development policies and pro25 grams. 
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1 (B) AUTHORIZATION.—There is authorized 

2 to be appropriated $2,500,000, for carrying out 

3 the purposes of this paragraph. 

4 (4) USE OF ACCOUNTS IN RURAL AREAS EN5 COURAGED.—The Secretary shall develop methods to 

6 encourage the use of Individual Development Ac7 counts in rural areas. 

8 SEC. 510. AUTHORIZATION OF APPROPRIATIONS. 

9 There is authorized to be appropriated to the Sec10 retary $1,000,000 for fiscal year 2004 and for each fiscal 

11 year through 2011, for the purposes of implementing this 

12 title, including the reporting, monitoring, and evaluation 

13 required under section 509, to remain available until ex14 pended.

15 SEC. 511. MATCHING FUNDS FOR INDIVIDUAL DEVELOP16 MENT ACCOUNTS PROVIDED THROUGH A TAX 

17 CREDIT FOR QUALIFIED FINANCIAL INSTITU18 TIONS. 

19 (a) IN GENERAL.—Subpart D of part IV of sub20 chapter A of chapter 1 (relating to business related cred21 its) is amended by adding at the end the following new 

22 section: 
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1 ‘‘SEC. 45G. INDIVIDUAL DEVELOPMENT ACCOUNT INVEST2 MENT CREDIT. 

3 ‘‘(a) DETERMINATION OF AMOUNT.—For purposes of 

4 section 38, the individual development account investment 

5 credit determined under this section with respect to any 

6 eligible entity for any taxable year is an amount equal to 

7 the individual development account investment provided 

8 by such eligible entity during the taxable year under an 

9 individual development account program established under 

10 section 504 of the Savings for Working Families Act of 

11 2003. 

12 ‘‘(b) APPLICABLE TAX.—For the purposes of this 

13 section, the term ‘applicable tax’ means the excess (if any) 

14 of—

15 ‘‘(1) the tax imposed under this chapter (other 

16 than the taxes imposed under the provisions de17 scribed in subparagraphs (C) through (Q) of section 

18 26(b)(2)), over 

19 ‘‘(2) the credits allowable under subpart B 

20 (other than this section) and subpart D of this part. 

21 ‘‘(c) INDIVIDUAL DEVELOPMENT ACCOUNT INVEST22 MENT.—For purposes of this section, the term ‘individual 

23 development account investment’ means, with respect to 

24 an individual development account program in any taxable 

25 year, an amount equal to the sum of—
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1 ‘‘(1) the aggregate amount of dollar-for-dollar 

2 matches under such program under section 

3 506(b)(1)(A) of the Savings for Working Families 

4 Act of 2003 for such taxable year, plus 

5 ‘‘(2) $50 with respect to each Individual Devel6 opment Account maintained—

7 ‘‘(A) as of the end of such taxable year, 

8 but only if such taxable year is within the 7-

9 taxable-year period beginning with the taxable 

10 year in which such Account is opened, and 

11 ‘‘(B) with a balance of not less than $100 

12 (other than the taxable year in which such Ac13 count is opened). 

14 ‘‘(d) ELIGIBLE ENTITY.—For purposes of this sec15 tion, except as provided in regulations, the term ‘eligible 

16 entity’ means a qualified financial institution. 

17 ‘‘(e) OTHER DEFINITIONS.—For purposes of this 

18 section, any term used in this section and also in the Sav19 ings for Working Families Act of 2003 shall have the 

20 meaning given such term by such Act. 

21 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—

22 ‘‘(1) IN GENERAL.—No deduction or credit 

23 (other than under this section) shall be allowed 

24 under this chapter with respect to any expense 

25 which—
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1 ‘‘(A) is taken into account under sub2 section (c)(1)(A) in determining the credit 

3 under this section, or 

4 ‘‘(B) is attributable to the maintenance of 

5 an Individual Development Account. 

6 ‘‘(2) DETERMINATION OF AMOUNT.—Solely for 

7 purposes of paragraph (1)(B), the amount attrib8 utable to the maintenance of an Individual Develop9 ment Account shall be deemed to be the dollar 

10 amount of the credit allowed under subsection 

11 (c)(l)(B) for each taxable year such Individual De12 velopment Account is maintained. 

13 ‘‘(g) CREDIT MAY BE TRANSFERRED.—

14 ‘‘(1) IN GENERAL.—An eligible entity may 

15 transfer any credit allowable to the eligible entity 

16 under subsection (a) to any person other than to an17 other eligible entity which is exempt from tax under 

18 this title. The determination as to whether a credit 

19 is allowable shall be made without regard to the tax20 exempt status of the eligible entity. 

21 ‘‘(2) CONSENT REQUIRED FOR REVOCATION.—

22 Any transfer under paragraph (1) may be revoked 

23 only with the consent of the Secretary.
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1 ‘‘(h) REGULATIONS.—The Secretary may prescribe 

2 such regulations as may be necessary or appropriate to 

3 carry out this section, including 

4 ‘‘(1) such regulations as necessary to insure 

5 that any credit described in subsection (g)(1) is 

6 claimed once and not retransferred by a transferee, 

7 and 

8 ‘‘(2) regulations providing for a recapture of 

9 the credit allowed under this section (notwith10 standing any termination date described in sub11 section (i)) in cases where there is a forfeiture under 

12 section 507(b) of the Savings for Working Families 

13 Act of 2003 in a subsequent taxable year of any 

14 amount which was taken into account in determining 

15 the amount of such credit. 

16 ‘‘(i) APPLICATION OF SECTION.—

17 ‘‘(1) IN GENERAL.—This section shall apply to 

18 any expenditure made in any taxable year ending 

19 after December 31, 2003, and beginning on or be20 fore January 1, 2011, with respect to any Individual 

21 Development Account which—

22 ‘‘(A) is opened before January 1, 2011, 

23 and 
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1 ‘‘(B) as determined by the Secretary, when 

2 added to all of the previously opened Individual 

3 Development Accounts, does not exceed—

4 ‘‘(i) 100,000 Accounts if opened after 

5 December 31, 2003, and before January 1, 

6 2007, 

7 ‘‘(ii) an additional 100,000 Accounts 

8 if opened after December 31, 2006, and 

9 before January 1, 2009, but only if, except 

10 as provided in paragraph (4), the total 

11 number of Accounts described in clause (i) 

12 are opened and the Secretary determines 

13 that such Accounts are being reasonably 

14 and responsibly administered, and 

15 ‘‘(iii) an additional 100,000 Accounts 

16 if opened after December 31, 2008, and 

17 before January 1, 2011, but only if the 

18 total number of Accounts described in 

19 clauses (i) and (ii) are opened and the Sec20 retary makes a determination described in 

21 paragraph (2). 

22 Notwithstanding the preceding sentence, this section 

23 shall apply to amounts which are described in sub24 section (c)(1)(A) and which are timely deposited into 

25 a parallel account during the 30-day period following 
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1 the end of last taxable year beginning before Janu2 ary 1, 2011. 

3 ‘‘(2) DETERMINATION WITH RESPECT TO

4 THIRD GROUP OF ACCOUNTS.—A determination is 

5 described in this paragraph if the Secretary deter6 mines that—

7 ‘‘(A) substantially all of the previously 

8 opened Accounts have been reasonably and re9 sponsibly administered prior to the date of the 

10 determination, 

11 ‘‘(B) the individual development account 

12 programs have increased net savings of partici13 pants in the programs, 

14 ‘‘(C) participants in the individual develop15 ment account programs have increased Federal 

16 income tax liability and decreased utilization of 

17 Federal assistance programs relative to simi18 larly situated individuals that did not partici19 pate in the individual development account pro20 grams, and 

21 ‘‘(D) the sum of the estimated increased 

22 Federal tax liability and reduction of Federal 

23 assistance program benefits to participants in 

24 the individual development account programs is 

25 greater than the cost of the individual develop-
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1 ment account programs to the Federal govern2 ment. 

3 ‘‘(3) DETERMINATION OF LIMITATION.—The 

4 limitation on the number of Individual Development 

5 Accounts under paragraph (1)(B) shall be allocated 

6 by the Secretary among qualified individual develop7 ment account programs selected by the Secretary 

8 and, in the case of the limitation under clause (iii) 

9 of such paragraph, shall be equally divided among 

10 the States. 

11 ‘‘(4) SPECIAL RULE IF SMALLER NUMBER OF

12 ACCOUNTS ARE OPENED.—For purposes of para13 graph (1)(B)(ii)—

14 ‘‘(i) IN GENERAL.—If less than 

15 100,000 Accounts are opened before Janu16 ary 1, 2007, such paragraph shall be ap17 plied by substituting ‘‘applicable number of 

18 Accounts’ for ‘100,000 Accounts’. 

19 ‘‘(ii) APPLICABLE NUMBER.—For pur20 poses of clause (i), the applicable number 

21 equals the lesser of—

22 ‘‘(I) 75,000, or 

23 ‘‘(II) 3 times the number of Ac24 counts opened before January 1, 

25 2007.’’. 
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1 (b) CREDIT TREATED AS BUSINESS CREDIT.—Sec2 tion 38(b) (relating to current year business credit) is 

3 amended by striking ‘‘plus’’ at the end of paragraph (14), 

4 by striking the period at the end of paragraph (15) and 

5 inserting ‘‘, plus’’, and by adding at the end the following 

6 new paragraph: 

7 ‘‘(16) the individual development account in8 vestment credit determined under section 45G(a).’’. 

9 (c) NO CARRYBACKS.—Subsection (d) of section 39 

10 (relating to carryback and carryforward of unused credits) 

11 is amended by adding at the end the following: 

12 ‘‘(11) NO CARRYBACK OF SECTION 45G CREDIT

13 BEFORE EFFECTIVE DATE.—No portion of the un14 used business credit for any taxable year which is 

15 attributable to the individual development account 

16 investment credit determined under section 45G may 

17 be carried back to a taxable year ending before Jan18 uary 1, 2004.’’. 

19 (d) CONFORMING AMENDMENT.—The table of sec20 tions for subpart C of part IV of subchapter A of chapter 

21 1 is amended by adding at the end the following new item:

‘‘Sec. 45G. Individual development account investment credit.’’.

22 (e) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to taxable years ending after De24 cember 31, 2003. 
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1 SEC. 512. ACCOUNT FUNDS DISREGARDED FOR PURPOSES 

2 OF CERTAIN MEANS-TESTED FEDERAL PRO3 GRAMS. 

4 Notwithstanding any other provision of Federal law 

5 (other than the Internal Revenue Code of 1986) that re6 quires consideration of 1 or more financial circumstances 

7 of an individual, for the purpose of determining eligibility 

8 to receive, or the amount of, any assistance or benefit au9 thorized by such provision to be provided to or for the 

10 benefit of such individual, any amount (including earnings 

11 thereon) in any Individual Development Account of such 

12 individual and any matching deposit made on behalf of 

13 such individual (including earnings thereon) in any par14 allel account shall be disregarded for such purpose with 

15 respect to any period during which such individual main16 tains or makes contributions into such Individual Develop17 ment Account. 

18 TITLE VI—MANAGEMENT OF 

19 EXEMPT ORGANIZATIONS 

20 SEC. 601. AUTHORIZATION OF APPROPRIATIONS. 

21 (a) IN GENERAL.—There is authorized to be appro22 priated to the Secretary of the Treasury $80,000,000 for 

23 each fiscal year to carry out the administration of exempt 

24 organizations by the Internal Revenue Service. 

25 (b) IMPLEMENTATION OF SECTION 527.—There is 

26 authorized to be appropriated to the Secretary of the 
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1 Treasury $3,000,000 to carry out the provisions of Public 

2 Laws 106–230 and 107–276 relating to section 527 of the 

3 Internal Revenue Code of 1986.

Æ