SEC. 108. ADJUSTMENT TO BASIS OF S CORPORATION 
STOCK 
FOR 
CERTAIN 
CHARITABLE 
CON-
TRIBUTIONS. 
(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 
shareholder’s pro rata share of the adjusted basis of 
such property.’’.
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
TITLE II—TAX REFORM AND IM-
PROVEMENTS RELATING TO 
CHARITABLE 
ORGANIZA-
TIONS AND PROGRAMS 
SEC. 201. SUSPENSION OF TAX-EXEMPT STATUS OF TER-
RORIST ORGANIZATIONS. 
(a) IN GENERAL.—Section 501 (relating to exemp-
tion from tax on corporations, certain trusts, etc.) is 
amended by redesignating subsection (p) as subsection (q) 
and by inserting after subsection (o) the following new 
subsection:
‘‘(p) SUSPENSION OF TAX-EXEMPT STATUS OF TER-
RORIST ORGANIZATIONS.—
‘‘(1) IN
GENERAL.—The exemption from tax 
under subsection (a) with respect to any organiza-
tion described in paragraph (2), and the eligibility of 
any organization described in paragraph (2) to apply 
for recognition of exemption under subsection (a), 
shall be suspended during the period described in 
paragraph (3). 
‘‘(2) TERRORIST ORGANIZATIONS.—An organi-
zation is described in this paragraph if such organi-
zation is designated or otherwise individually identi-
fied— 
‘‘(A) under section 212(a)(3)(B)(vi)(II) or 
219 of the Immigration and Nationality Act as 
a terrorist organization or foreign terrorist or-
ganization, 
‘‘(B) in or pursuant to an Executive order 
which is related to terrorism and issued under 
the authority of the International Emergency 
Economic Powers Act or section 5 of the 
United Nations Participation Act of 1945 for 
the purpose of imposing on such organization 
an economic or other sanction, or
‘‘(C) in or pursuant to an Executive order 
issued under the authority of any Federal law 
if—
‘‘(i) the organization is designated or 
otherwise individually identified in or pur-
suant to such Executive order as sup-
porting or engaging in terrorist activity (as 
defined in section 212(a)(3)(B) of the Im-
migration and Nationality Act) or sup-
porting terrorism (as defined in section 
140(d)(2) of the Foreign Relations Author-
ization Act, Fiscal Years 1988 and 1989); 
and 
‘‘(ii) such Executive order refers to 
this subsection. 
‘‘(3) PERIOD OF SUSPENSION.—With respect to 
any organization described in paragraph (2), the pe-
riod of suspension—
‘‘(A) begins on the later of—
‘‘(i) the date of the first publication of 
a designation or identification described in 
paragraph (2) with respect to such organi-
zation, or 
‘‘(ii) the date of the enactment of this 
subsection, and
‘‘(B) ends on the first date that all des-
ignations and identifications described in para-
graph (2) with respect to such organization are 
rescinded pursuant to the law or Executive 
order under which such designation or identi-
fication was made. 
‘‘(4) DENIAL
OF
DEDUCTION.—No deduction 
shall be allowed under section 170, 545(b)(2), 
556(b)(2), 642(c), 2055, 2106(a)(2), or 2522 for 
any contribution to an organization described in 
paragraph (2) during the period described in para-
graph (3). 
‘‘(5) DENIAL OF ADMINISTRATIVE OR JUDICIAL 
CHALLENGE OF SUSPENSION OR DENIAL OF DEDUC-
TION.—Notwithstanding section 7428 or any other 
provision of law, no organization or other person 
may challenge a suspension under paragraph (1), a 
designation or identification described in paragraph 
(2), the period of suspension described in paragraph 
(3), or a denial of a deduction under paragraph (4) 
in any administrative or judicial proceeding relating 
to the Federal tax liability of such organization or 
other person. 
‘‘(6) ERRONEOUS DESIGNATION.—
‘‘(A) IN GENERAL.—If—
‘‘(i) the tax exemption of any organi-
zation described in paragraph (2) is sus-
pended under paragraph (1), 
‘‘(ii) each designation and identifica-
tion described in paragraph (2) which has 
been made with respect to such organiza-
tion is determined to be erroneous pursu-
ant to the law or Executive order under 
which such designation or identification 
was made, and 
‘‘(iii) the erroneous designations and 
identifications result in an overpayment of 
income tax for any taxable year by such 
organization, 
credit or refund (with interest) with respect to 
such overpayment shall be made. 
‘‘(B) WAIVER
OF
LIMITATIONS.—If the 
credit or refund of any overpayment of tax de-
scribed in subparagraph (A)(iii) is prevented at 
any time by the operation of any law or rule of 
law (including res judicata), such credit or re-
fund may nevertheless be allowed or made if the 
claim therefor is filed before the close of the 1-
year period beginning on the date of the last