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charitable deductions under section 642(c)) is amend-
ed to read as follows:
‘‘SEC. 6034. RETURNS BY CERTAIN TRUSTS.
‘‘(a) SPLIT-INTEREST TRUSTS.—Every trust described
in section 4947(a)(2) shall furnish such information with
respect to the taxable year as the Secretary may by forms
or regulations require.
‘‘(b) TRUSTS CLAIMING CERTAIN CHARITABLE DE-
DUCTIONS.—
‘‘(1) IN GENERAL.—Every trust not required to
file a return under subsection (a) but claiming a de-
duction under section 642(c) for the taxable year shall
furnish such information with respect to such taxable
year as the Secretary may by forms or regulations
prescribe, including—
‘‘(A) the amount of the deduction taken
under section 642(c) within such year,
‘‘(B) the amount paid out within such year
which represents amounts for which deductions
under section 642(c) have been taken in prior
years,
‘‘(C) the amount for which such deductions
have been taken in prior years but which has not
been paid out at the beginning of such year,
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‘‘(D) the amount paid out of principal in
the current and prior years for the purposes de-
scribed in section 642(c),
‘‘(E) the total income of the trust within
such year and the expenses attributable thereto,
and
‘‘(F) a balance sheet showing the assets, li-
abilities, and net worth of the trust as of the be-
ginning of such year.
‘‘(2) EXCEPTIONS.—Paragraph (1) shall not
apply to a trust for any taxable year if—
‘‘(A) all the net income for such year, deter-
mined under the applicable principles of the law
of trusts, is required to be distributed currently
to the beneficiaries, or
‘‘(B) the trust is described in section
4947(a)(1).’’.
(2) INCREASE IN PENALTY RELATING TO FILING
OF
INFORMATION
RETURN
BY
SPLIT-INTEREST
TRUSTS.—Paragraph (2) of section 6652(c) (relating
to returns by exempt organizations and by certain
trusts) is amended by adding at the end the following
new subparagraph:
‘‘(C) SPLIT-INTEREST TRUSTS.—In the case
of a trust which is required to file a return
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under section 6034(a), subparagraphs (A) and
(B) of this paragraph shall not apply and para-
graph (1) shall apply in the same manner as if
such return were required under section 6033,
except that—
‘‘(i) the 5 percent limitation in the sec-
ond sentence of paragraph (1)(A) shall not
apply,
‘‘(ii) in the case of any trust with gross
income in excess of $250,000, the first sen-
tence of paragraph (1)(A) shall be applied
by substituting ‘$100’ for ‘$20’, and the sec-
ond sentence thereof shall be applied by sub-
stituting ‘$50,000’ for ‘$10,000’, and
‘‘(iii) the third sentence of paragraph
(1)(A) shall be disregarded.
In addition to any penalty imposed on the trust
pursuant to this subparagraph, if the person re-
quired to file such return knowingly fails to file
the return, such penalty shall also be imposed on
such person who shall be personally liable for
such penalty.’’.
(3) CONFIDENTIALITY OF NONCHARITABLE BENE-
FICIARIES.—Subsection (b) of section 6104 (relating
to inspection of annual information returns) is
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amended by adding at the end the following new sen-
tence: ‘‘In the case of a trust which is required to file
a return under section 6034(a), this subsection shall
not apply to information regarding beneficiaries
which are not organizations described in section
170(c).’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendment made by
subsection (a) shall apply to distributions made in
taxable years beginning after December 31, 2005.
(2) SUBSECTION (b).—The amendments made by
subsection (b) shall apply to returns for taxable years
beginning after December 31, 2005.
SEC. 203. MODIFICATION OF CHARITABLE DEDUCTION FOR
CONTRIBUTIONS OF FOOD INVENTORY.
(a) IN
GENERAL.—Subparagraph (C) of section
170(e)(3) (relating to special rule for certain contributions
of inventory and other property) is amended to read as fol-
lows:
‘‘(C) SPECIAL
RULE
FOR
CONTRIBUTIONS
OF FOOD INVENTORY.—
‘‘(i) GENERAL RULE.—In the case of a
charitable contribution of food from any
trade or business of the taxpayer, this para-
graph shall be applied—
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‘‘(I) without regard to whether the
contribution is made by a C corpora-
tion, and
‘‘(II) only to food that is appar-
ently wholesome food.
‘‘(ii) LIMITATION.—In the case of a
taxpayer other than a C corporation, the
aggregate amount of such contributions for
any taxable year which may be taken into
account under this section shall not exceed
10 percent of the taxpayer’s aggregate net
income for such taxable year from all trades
or businesses from which such contributions
were made for such year, computed without
regard to this section.
‘‘(iii) LIMITATION ON REDUCTION.—In
the case of any such contribution, notwith-
standing subparagraph (B), the amount of
the reduction determined under paragraph
(1)(A) shall not exceed the amount by which
the fair market value of the apparently
wholesome food exceeds twice the basis of
such food.
‘‘(iv) DETERMINATION OF BASIS.—If a
taxpayer—
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‘‘(I) does not account for inven-
tories under section 471, and
‘‘(II) is not required to capitalize
indirect costs under section 263A,
the taxpayer may elect, solely for purposes
of subparagraph (B), to treat the basis of
any apparently wholesome food as being
equal to 25 percent of the fair market value
of such food.
‘‘(v) DETERMINATION OF FAIR MARKET
VALUE.—In the case of any such contribu-
tion of apparently wholesome food which,
solely by reason of internal standards of the
taxpayer or lack of market, cannot or will
not be sold, the fair market value of such
contribution shall be determined—
‘‘(I) without regard to such inter-
nal standards or such lack of market
and
‘‘(II) by taking into account the
price at which the same or substan-
tially the same food items (as to both
type and quality) are sold by the tax-
payer at the time of the contribution
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(or, if not so sold at such time, in the
recent past).
‘‘(vi) 
APPARENTLY
WHOLESOME
FOOD.—For purposes of this subparagraph,
the term ‘apparently wholesome food’ has
the meaning given to such term by section
22(b)(2) of the Bill Emerson Good Samari-
tan 
Food 
Donation 
Act 
(42 
U.S.C.
1791(b)(2)), as in effect on the date of the
enactment of this subparagraph.
‘‘(vii) TERMINATION.—This subpara-
graph shall not apply to contributions made
after December 31, 2007.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions made after December
31, 2005.
SEC. 204. BASIS ADJUSTMENT TO STOCK OF S CORPORA-
TION CONTRIBUTING PROPERTY.
(a) IN GENERAL.—Paragraph (2) of section 1367(a)
(relating to adjustments to basis of stock of shareholders,
etc.) is amended by adding at the end the following new
flush sentence:
‘‘The decrease under subparagraph (B) by reason of
a charitable contribution (as defined in section
170(c)) of property shall be the amount equal to the
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shareholder’s pro rata share of the adjusted basis of
such property. The preceding sentence shall not apply
to contributions made in taxable years beginning
after December 31, 2007.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions made in taxable years
beginning after December 31, 2005.
SEC. 205. MODIFICATION OF CHARITABLE DEDUCTION FOR
CONTRIBUTIONS OF BOOK INVENTORY.
(a) IN
GENERAL.—Subparagraph (D) of section
170(e)(3) (relating to special rule for certain contributions
of inventory and other property) is amended to read as fol-
lows:
‘‘(D) SPECIAL
RULE
FOR
CONTRIBUTIONS
OF
BOOK
INVENTORY
FOR
EDUCATIONAL
PUR-
POSES.—
‘‘(i) CONTRIBUTIONS OF BOOK INVEN-
TORY.—In determining whether a qualified
book contribution is a qualified contribu-
tion, subparagraph (A) shall be applied
without regard to whether—
‘‘(I) the donee is an organization
described in the matter preceding
clause (i) of subparagraph (A), and
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‘‘(II) the property is to be used by
the donee solely for the care of the ill,
the needy, or infants.
‘‘(ii) AMOUNT
OF
REDUCTION.—Not-
withstanding 
subparagraph 
(B), 
the
amount of the reduction determined under
paragraph (1)(A) shall not exceed the
amount by which the fair market value of
the contributed property (as determined by
the taxpayer using a bona fide published
market price for such book) exceeds twice
the basis of such property.
‘‘(iii) QUALIFIED
BOOK
CONTRIBU-
TION.—For purposes of this paragraph, the
term ‘qualified book contribution’ means a
charitable contribution of books, but only if
the requirements of clauses (iv) and (v) are
met.
‘‘(iv) IDENTITY
OF
DONEE.—The re-
quirement of this clause is met if the con-
tribution is to an organization—
‘‘(I) described in subclause (I) or
(III) of paragraph (6)(B)(i), or
‘‘(II) 
described 
in 
section
501(c)(3) and exempt from tax under
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section 501(a) (other than a private
foundation, as defined in section
509(a), which is not an operating
foundation, as defined in section
4942(j)(3)), which is organized pri-
marily to make books available to the
general public at no cost or to operate
a literacy program.
‘‘(v) CERTIFICATION BY DONEE.—The
requirement of this clause is met if, in addi-
tion to the certifications required by sub-
paragraph (A) (as modified by this sub-
paragraph), the donee certifies in writing
that—
‘‘(I) the books are suitable, in
terms of currency, content, and quan-
tity, for use in the donee’s educational
programs, and
‘‘(II) the donee will use the books
in its educational programs.
‘‘(vi) BONA FIDE PUBLISHED MARKET
PRICE.—For purposes of this subparagraph,
the term ‘bona fide published market price’
means, with respect to any book, a price—
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‘‘(I) determined using the same
printing and edition,
‘‘(II) determined in the usual
market in which such a book has been
customarily sold by the taxpayer, and
‘‘(III) for which the taxpayer can
demonstrate to the satisfaction of the
Secretary that the taxpayer custom-
arily sold such books in arm’s length
transactions within 7 years preceding
the contribution of such a book.
‘‘(vii) TERMINATION.—This subpara-
graph shall not apply to contributions made
after December 31, 2007.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions made after December
31, 2005.
SEC. 206. MODIFICATION OF TAX TREATMENT OF CERTAIN
PAYMENTS TO CONTROLLING EXEMPT ORGA-
NIZATIONS AND PUBLIC DISCLOSURE OF IN-
FORMATION RELATING TO UNRELATED BUSI-
NESS INCOME.
(a) MODIFICATION OF SECTION 512(b)(13).—
(1) IN
GENERAL.—Paragraph (13) of section
512(b) (relating to special rules for certain amounts
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received from controlled entities) is amended by redes-
ignating subparagraph (E) as subparagraph (F) and
by inserting after subparagraph (D) the following
new subparagraph:
‘‘(E) PARAGRAPH TO APPLY ONLY TO EX-
CESS PAYMENTS.—
‘‘(i) IN GENERAL.—Subparagraph (A)
shall apply only to the portion of a speci-
fied payment received or accrued by the
controlling organization that exceeds the
amount which would have been paid or ac-
crued if such payment met the requirements
prescribed under section 482.
‘‘(ii) ADDITION TO TAX FOR VALUATION
MISSTATEMENTS.—The tax imposed by this
chapter on the controlling organization
shall be increased by an amount equal to 20
percent of the larger of—
‘‘(I) such excess determined with-
out regard to any amendment or sup-
plement to a return of tax, or
‘‘(II) such excess determined with
regard to all such amendments and
supplements.’’.
(2) EFFECTIVE DATE.—
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(A) IN
GENERAL.—The amendment made
by this subsection shall apply to payments re-
ceived or accrued after December 31, 2000.
(B) PAYMENTS SUBJECT TO BINDING CON-
TRACT TRANSITION RULE.—If the amendments
made by section 1041 of the Taxpayer Relief Act
of 1997 did not apply to any amount received or
accrued in the first 2 taxable years beginning on
or after the date of the enactment of the Tax-
payer Relief Act of 1997 under any contract de-
scribed in subsection (b)(2) of such section, such
amendments also shall not apply to amounts re-
ceived or accrued under such contract before
January 1, 2001.
(b) PUBLIC AVAILABILITY OF UNRELATED BUSINESS
INCOME TAX RETURNS.—
(1) IN GENERAL.—Subparagraph (A) of section
6104(d)(1) is amended by redesignating clauses (ii)
and (iii) as clauses (iii) and (iv), respectively, and
by inserting after clause (i) the following new clause:
‘‘(ii) any annual return filed under
section 6011 which relates to any tax im-
posed by section 511 (relating to imposition
of tax on unrelated business income of char-
itable, etc., organizations) by such organiza-
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tion, but only if such organization is de-
scribed in section 501(c)(3),’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to returns filed after the
date of the enactment of this Act.
(c) CERTIFICATION OF UNRELATED BUSINESS TAX-
ABLE INCOME FOR CERTAIN ORGANIZATIONS.—
(1) IN GENERAL.—Section 6011 is amended by
redesignating subsection (g) as subsection (h) and by
inserting after subsection (f) the following new sub-
section:
‘‘(g) RETURNS OF CERTAIN ORGANIZATIONS RELAT-
ING TO UNRELATED BUSINESS TAXABLE INCOME.—
‘‘(1) IN GENERAL.—Every applicable exempt or-
ganization shall include with the return under sub-
section (a) for the taxable year a statement by an
independent auditor or an independent counsel which
meets the requirements of paragraph (2).
‘‘(2) STATEMENT.—A statement meets the re-
quirement of this paragraph if the statement—
‘‘(A) contains a certification that—
‘‘(i) the information contained in the
return—
‘‘(I) has been reviewed by the
auditor or counsel, and
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‘‘(II) to the best of the auditor’s or
counsel’s knowledge, is accurate, and
‘‘(ii) to the best of the auditor’s or
counsel’s knowledge, the allocation of ex-
penses between the unrelated trades and
business of the organization and the activi-
ties related to the purpose or function con-
stituting the basis of the organization’s ex-
emption under section 501 complies with
the requirements set forth by the Secretary
under section 512, and
‘‘(B) indicates—
‘‘(i) whether the auditor or counsel has
provided a tax opinion to the organization
regarding—
‘‘(I) the classification of any trade
or business of the organization as an
unrelated trade or business, or
‘‘(II) the treatment of any income
as unrelated business taxable income,
and
‘‘(ii) a description of any material
facts with respect to any such opinion.
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‘‘(3) APPLICABLE EXEMPT ORGANIZATION.—For
purposes of this subsection, the term ‘applicable ex-
empt organization’ means any organization which—
‘‘(A) is described in section 501(c)(3),
‘‘(B) has—
‘‘(i) gross income and receipts of not
less than $10,000,000 for the taxable year,
or
‘‘(ii) gross assets of not less than
$10,000,000 on the last day of the taxable
year, and
‘‘(C) is subject to the tax imposed under sec-
tion 511 for the taxable year.’’.
(2) PENALTY.—
(A) IN GENERAL.—Part I of subchapter B
of chapter 68 (relating to assessable penalties) is
amended by adding at the end the following new
section:
‘‘SEC. 6720B. UNRELATED BUSINESS INCOME REQUIRE-
MENTS.
‘‘(a) IN GENERAL.—Any applicable exempt organiza-
tion (as defined in section 6011(g)(3)) which fails to file
a statement required under section 6011(g) shall pay a pen-
alty in an amount equal to 1⁄2 percent of the gross revenue
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amount of such organization for the taxable year to which
such statement relates.
‘‘(b) GROSS REVENUE AMOUNT.—For purposes of sub-
section (a), the term ‘gross revenue amount’ means, with
respect to any taxable year, the gross income and receipts
of the organization determined without regard to any con-
tributions or grants received by the organization.
‘‘(c) REASONABLE CAUSE.—No penalty shall be im-
posed under this section with respect to any failure if it
is shown that such failure is due to reasonable cause.’’.
(B) CONFORMING AMENDMENT.—The table
of sections of part I of subchapter B of chapter
68 is amended by adding after the item relating
to section 6720A the following new item:
‘‘Sec. 6720B. Unrelated business income requirements.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to returns for taxable
years beginning after the date of the enactment of this
Act.
SEC. 207. ENCOURAGEMENT OF CONTRIBUTIONS OF CAP-
ITAL GAIN REAL PROPERTY MADE FOR CON-
SERVATION PURPOSES.
(a) IN GENERAL.—
(1) INDIVIDUALS.—Paragraph (1) of subsection
170(b) (relating to percentage limitations) is amended
by redesignating subparagraphs (E) and (F) as sub-
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paragraphs (F) and (G), respectively, and by insert-
ing after subparagraph (D) the following new sub-
paragraph:
‘‘(E) CONTRIBUTIONS OF QUALIFIED CON-
SERVATION CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—Any qualified con-
servation contribution (as defined in sub-
section (h)(1)) to an organization described
in subparagraph (A) shall be allowed to the
extent the aggregate of such contributions
does not exceed the excess of 50 percent of
the taxpayer’s contribution base over the
amount of all other charitable contributions
allowable under this paragraph.
‘‘(ii) CARRYOVER.—If the aggregate
amount of contributions described in clause
(i) exceeds the limitation of clause (i), such
excess shall be treated (in a manner con-
sistent with the rules of subsection (d)(1))
as a charitable contribution to which clause
(i) applies in each of the 15 succeeding
years in order of time.
‘‘(iii) COORDINATION
WITH
OTHER
SUBPARAGRAPHS.—For purposes of apply-
ing this subsection and subsection (d)(1),