805 
organization have directly or indirectly held an 
interest in the contract (whether or not at the 
same time). 
‘‘(B) EXCEPTIONS.—Such term shall not 
include a life insurance, annuity, or endowment 
contract if— 
‘‘(i) all persons directly or indirectly 
holding any interest in the contract (other 
than applicable exempt organizations) have 
an insurable interest in the insured under 
the contract independent of any interest of 
an applicable exempt organization in the 
contract, 
‘‘(ii) the sole interest in the contract 
of an applicable exempt organization or 
each person other than an applicable ex-
empt organization is as a named bene-
ficiary, or 
‘‘(iii) the sole interest in the contract 
of each person other than an applicable ex-
empt organization is— 
‘‘(I) as a beneficiary of a trust 
holding an interest in the contract, 
but only if the person’s designation as 
such beneficiary was made without 
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ccoleman on PROD1PC71 with BILLS
806 
consideration and solely on a purely 
gratuitous basis, or 
‘‘(II) as a trustee who holds an 
interest in the contract in a fiduciary 
capacity solely for the benefit of appli-
cable exempt organizations or persons 
otherwise described in subclause (I) or 
clause (i) or (ii). 
‘‘(3) APPLICABLE
EXEMPT
ORGANIZATION.— 
The term ‘applicable exempt organization’ means— 
‘‘(A) an organization described in section 
170(c), 
‘‘(B) an organization described in section 
168(h)(2)(A)(iv), or 
‘‘(C) an organization not described in 
paragraph (1) or (2) which is described in sec-
tion 2055(a) or section 2522(a). 
‘‘(e) TERMINATION.—This section shall not apply to 
reportable acquisitions occurring after the date which is 
2 years after the date of the enactment of this section.’’. 
(2) CONFORMING AMENDMENT.—The table of 
sections for subpart B of part III of subchapter A 
of chapter 61 is amended by adding at the end the 
following new item: 
‘‘Sec. 6050V. Returns relating to applicable insurance contracts in which cer-
tain exempt organizations hold interests.’’. 
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ccoleman on PROD1PC71 with BILLS
807 
(b) PENALTIES.— 
(1) IN GENERAL.—Subparagraph (B) of section 
6724(d)(1), as amended by this Act, is amended by 
redesignating clauses (xiv) through (xix) as clauses 
(xv) through (xx) and by inserting after clause (xiii) 
the following new clause: 
‘‘(xiv) section 6050V (relating to re-
turns relating to applicable insurance con-
tracts in which certain exempt organiza-
tions hold interests),’’. 
(2) 
INTENTIONAL
DISREGARD.—Section 
6721(e)(2) is amended by striking ‘‘or’’ at the end 
of subparagraph (B), by striking ‘‘and’’ at the end 
of subparagraph (C) and inserting ‘‘or’’, and by add-
ing at the end the following new subparagraph: 
‘‘(D) in the case of a return required to be 
filed under section 6050V, 10 percent of the 
value of the benefit of any contract with respect 
to which information is required to be included 
on the return, and’’. 
(c) STUDY.— 
(1) IN GENERAL.—The Secretary of the Treas-
ury shall undertake a study on— 
(A) the use by tax exempt organizations of 
applicable insurance contracts (as defined under 
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808 
section 6050V(d)(2) of the Internal Revenue 
Code of 1986, as added by subsection (a)) for 
the purpose of sharing the benefits of the orga-
nization’s insurable interest in individuals in-
sured under such contracts with investors, and 
(B) whether such activities are consistent 
with the tax exempt status of such organiza-
tions. 
(2) REPORT.—Not later than 30 months after 
the date of the enactment of this Act, the Secretary 
of the Treasury shall report on the study conducted 
under paragraph (1) to the Committee on Finance 
of the Senate and the Committee on Ways and 
Means of the House of Representatives. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to acquisitions of contracts after 
the date of enactment of this Act. 
SEC. 1212. INCREASE IN PENALTY EXCISE TAXES RELATING 
TO PUBLIC CHARITIES, SOCIAL WELFARE OR-
GANIZATIONS, AND PRIVATE FOUNDATIONS. 
(a) TAXES ON SELF-DEALING AND EXCESS BENEFIT 
TRANSACTIONS.— 
(1) IN GENERAL.—Section 4941(a) (relating to 
initial taxes) is amended— 
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809 
(A) in paragraph (1), by striking ‘‘5 per-
cent’’ and inserting ‘‘10 percent’’, and 
(B) in paragraph (2), by striking ‘‘21⁄2 
percent’’ and inserting ‘‘5 percent’’. 
(2) INCREASED LIMITATION FOR MANAGERS ON 
SELF-DEALING.—Section 4941(c)(2) is amended by 
striking ‘‘$10,000’’ each place it appears in the text 
and heading thereof and inserting ‘‘$20,000’’. 
(3) INCREASED LIMITATION FOR MANAGERS ON 
EXCESS
BENEFIT
TRANSACTIONS.—Section 
4958(d)(2) is amended by striking ‘‘$10,000’’ and 
inserting ‘‘$20,000’’. 
(b) TAXES ON FAILURE TO DISTRIBUTE INCOME.— 
Section 4942(a) (relating to initial tax) is amended by 
striking ‘‘15 percent’’ and inserting ‘‘30 percent’’. 
(c) TAXES ON EXCESS BUSINESS HOLDINGS.—Sec-
tion 4943(a)(1) (relating to imposition) is amended by 
striking ‘‘5 percent’’ and inserting ‘‘10 percent’’. 
(d) TAXES ON INVESTMENTS WHICH JEOPARDIZE 
CHARITABLE PURPOSE.— 
(1) IN GENERAL.—Section 4944(a) (relating to 
initial taxes) is amended by striking ‘‘5 percent’’ 
both places it appears and inserting ‘‘10 percent’’. 
(2) INCREASED LIMITATION FOR MANAGERS.— 
Section 4944(d)(2) is amended— 
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