736 
‘‘(B) MATCHING CONTRIBUTIONS.—In ap-
plying section 401(m)(11) of such Code to any 
matching contribution with respect to a con-
tribution to which paragraph (2)(C) applies, the 
contribution requirement of paragraph (2)(C) 
and the notice requirements of paragraph 
(5)(B) shall be substituted for the requirements 
otherwise applicable under clauses (i) and (ii) of 
section 401(m)(11)(A) of such Code. 
‘‘(4) AUTOMATIC
CONTRIBUTION
ARRANGE-
MENT.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—A qualified cash or 
deferred arrangement shall be treated as an 
automatic contribution arrangement if the ar-
rangement— 
‘‘(i) provides that each employee eligi-
ble to participate in the arrangement is 
treated as having elected to have the em-
ployer make elective contributions in an 
amount equal to 4 percent of the employ-
ee’s compensation unless the employee spe-
cifically elects not to have such contribu-
tions made or to have such contributions 
made at a different rate, and 
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‘‘(ii) meets the notice requirements 
under subparagraph (B). 
‘‘(B) NOTICE REQUIREMENTS.— 
‘‘(i) IN GENERAL.—The requirements 
of this subparagraph are met if the re-
quirements of clauses (ii) and (iii) are met. 
‘‘(ii) REASONABLE PERIOD TO MAKE 
ELECTION.—The 
requirements 
of 
this 
clause are met if each employee to whom 
subparagraph (A)(i) applies— 
‘‘(I) receives a notice explaining 
the employee’s right under the ar-
rangement to elect not to have elective 
contributions made on the employee’s 
behalf or to have the contributions 
made at a different rate, and 
‘‘(II) has a reasonable period of 
time after receipt of such notice and 
before the first elective contribution is 
made to make such election. 
‘‘(iii) ANNUAL
NOTICE
OF
RIGHTS 
AND OBLIGATIONS.—The requirements of 
this clause are met if each employee eligi-
ble to participate in the arrangement is, 
within a reasonable period before any year, 
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given notice of the employee’s rights and 
obligations under the arrangement. 
The requirements of this subparagraph shall 
not be treated as met unless the requirements 
of clauses (i) and (ii) of section 401(k)(12)(D) 
of the Internal Revenue Code of 1986 are met 
with respect to the notices described in clauses 
(ii) and (iii) of this subparagraph. 
‘‘(5) COORDINATION
WITH
OTHER
REQUIRE-
MENTS.— 
‘‘(A) TREATMENT OF SEPARATE PLANS.— 
The except clause in section 3(35) shall not 
apply to an eligible combined plan. 
‘‘(B) REPORTING.—An eligible combined 
plan shall be treated as a single plan for pur-
poses of section 103. 
‘‘(6) 
APPLICABLE
INDIVIDUAL
ACCOUNT 
PLAN.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘applicable 
individual account plan’ means an individual ac-
count plan which includes a qualified cash or 
deferred arrangement. 
‘‘(B) QUALIFIED CASH OR DEFERRED AR-
RANGEMENT.—The term ‘qualified cash or de-
ferred arrangement’ has the meaning given 
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ccoleman on PROD1PC71 with BILLS
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such term by section 401(k)(2) of the Internal 
Revenue Code of 1986.’’. 
(2) CONFORMING CHANGES.— 
(A) The heading for section 210 of such 
Act is amended to read as follows: 
‘‘SEC. 210. MULTIPLE EMPLOYER PLANS AND OTHER SPE-
CIAL RULES.’’. 
(B) The table of contents in section 1 of 
such Act is amended by striking the item relat-
ing to section 210 and inserting the following 
new item: 
‘‘Sec. 210. Multiple employer plans and other special rules.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to plan years beginning after De-
cember 31, 2009. 
SEC. 904. FASTER VESTING OF EMPLOYER NONELECTIVE 
CONTRIBUTIONS. 
(a) AMENDMENTS
TO
THE INTERNAL REVENUE 
CODE OF 1986.— 
(1) IN
GENERAL.—Paragraph (2) of section 
411(a) of the Internal Revenue Code of 1986 (relat-
ing to employer contributions) is amended to read as 
follows: 
‘‘(2) EMPLOYER CONTRIBUTIONS.— 
‘‘(A) DEFINED BENEFIT PLANS.— 
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‘‘(i) IN GENERAL.—In the case of a 
defined benefit plan, a plan satisfies the 
requirements of this paragraph if it satis-
fies the requirements of clause (ii) or (iii). 
‘‘(ii) 5-YEAR VESTING.—A plan satis-
fies the requirements of this clause if an 
employee who has completed at least 5 
years of service has a nonforfeitable right 
to 100 percent of the employee’s accrued 
benefit derived from employer contribu-
tions. 
‘‘(iii) 3 TO 7 YEAR VESTING.—A plan 
satisfies the requirements of this clause if 
an employee has a nonforfeitable right to 
a percentage of the employee’s accrued 
benefit derived from employer contribu-
tions determined under the following table: 
The nonforfeitable 
‘‘Years of service: 
percentage is: 
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 .........................................................................................................
7 or more ...........................................................................................
100. 
‘‘(B) DEFINED CONTRIBUTION PLANS.— 
‘‘(i) IN GENERAL.—In the case of a 
defined contribution plan, a plan satisfies 
the requirements of this paragraph if it 
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satisfies the requirements of clause (ii) or 
(iii). 
‘‘(ii) 3-YEAR VESTING.—A plan satis-
fies the requirements of this clause if an 
employee who has completed at least 3 
years of service has a nonforfeitable right 
to 100 percent of the employee’s accrued 
benefit derived from employer contribu-
tions. 
‘‘(iii) 2 TO 6 YEAR VESTING.—A plan 
satisfies the requirements of this clause if 
an employee has a nonforfeitable right to 
a percentage of the employee’s accrued 
benefit derived from employer contribu-
tions determined under the following table: 
The nonforfeitable 
‘‘Years of service: 
percentage is: 
2 .........................................................................................................
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 or more ...........................................................................................
100.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
411(a) of such Code (relating to general rule for 
minimum vesting standards) is amended by striking 
paragraph (12). 
(b) AMENDMENTS TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.— 
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(1) IN
GENERAL.—Paragraph (2) of section 
203(a) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1053(a)(2)) is amended to 
read as follows: 
‘‘(2)(A)(i) In the case of a defined benefit plan, 
a plan satisfies the requirements of this paragraph 
if it satisfies the requirements of clause (ii) or (iii). 
‘‘(ii) A plan satisfies the requirements of this 
clause if an employee who has completed at least 5 
years of service has a nonforfeitable right to 100 
percent of the employee’s accrued benefit derived 
from employer contributions. 
‘‘(iii) A plan satisfies the requirements of this 
clause if an employee has a nonforfeitable right to 
a percentage of the employee’s accrued benefit de-
rived from employer contributions determined under 
the following table: 
The nonforfeitable 
‘‘Years of service: 
percentage is: 
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 .........................................................................................................
7 or more ...........................................................................................
100. 
‘‘(B)(i) In the case of an individual account 
plan, a plan satisfies the requirements of this para-
graph if it satisfies the requirements of clause (ii) or 
(iii). 
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‘‘(ii) A plan satisfies the requirements of this 
clause if an employee who has completed at least 3 
years of service has a nonforfeitable right to 100 
percent of the employee’s accrued benefit derived 
from employer contributions. 
‘‘(iii) A plan satisfies the requirements of this 
clause if an employee has a nonforfeitable right to 
a percentage of the employee’s accrued benefit de-
rived from employer contributions determined under 
the following table: 
The nonforfeitable 
‘‘Years of service: 
percentage is: 
2 .........................................................................................................
3 .........................................................................................................
4 .........................................................................................................
5 .........................................................................................................
6 or more ...........................................................................................
100.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
203(a) of such Act is amended by striking para-
graph (4). 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graphs (2) and (4), the amendments made by this 
section shall apply to contributions for plan years 
beginning after December 31, 2006. 
(2) COLLECTIVE BARGAINING AGREEMENTS.— 
In the case of a plan maintained pursuant to one or 
more collective bargaining agreements between em-
ployee representatives and one or more employers 
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ratified before the date of the enactment of this Act, 
the amendments made by this section shall not apply 
to contributions on behalf of employees covered by 
any such agreement for plan years beginning before 
the earlier of— 
(A) the later of— 
(i) the date on which the last of such 
collective bargaining agreements termi-
nates (determined without regard to any 
extension thereof on or after such date of 
the enactment); or 
(ii) January 1, 2007; or 
(B) January 1, 2009. 
(3) SERVICE REQUIRED.—With respect to any 
plan, the amendments made by this section shall not 
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any 
plan year to which the amendments made by this 
section apply. 
(4) SPECIAL
RULE
FOR
STOCK
OWNERSHIP 
PLANS.—Notwithstanding paragraph (1) or (2), in 
the case of an employee stock ownership plan (as de-
fined in section 4975(e)(7) of the Internal Revenue 
Code of 1986) which had outstanding on September 
26, 2005, a loan incurred for the purpose of acquir-
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ing qualifying employer securities (as defined in sec-
tion 4975(e)(8) of such Code), the amendments 
made by this section shall not apply to any plan year 
beginning before the earlier of— 
(A) the date on which the loan is fully re-
paid, or 
(B) the date on which the loan was, as of 
September 26, 2005, scheduled to be fully re-
paid. 
SEC. 905. DISTRIBUTIONS DURING WORKING RETIREMENT. 
(a) AMENDMENT TO THE EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Subparagraph (A) of 
section 3(2) of the Employee Retirement Income Security 
Act of 1974 (29 U.S.C. 1002(2)) is amended by adding 
at the end the following new sentence: ‘‘A distribution 
from a plan, fund, or program shall not be treated as 
made in a form other than retirement income or as a dis-
tribution prior to termination of covered employment sole-
ly because such distribution is made to an employee who 
has attained age 62 and who is not separated from em-
ployment at the time of such distribution.’’. 
(b) AMENDMENT TO THE INTERNAL REVENUE CODE 
OF 1986.—Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 (as amended by this Act) is amend-
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ed by inserting after paragraph (35) the following new 
paragraph: 
‘‘(36) DISTRIBUTIONS
DURING
WORKING
RE-
TIREMENT.—A trust forming part of a pension plan 
shall not be treated as failing to constitute a quali-
fied trust under this section solely because the plan 
provides that a distribution may be made from such 
trust to an employee who has attained age 62 and 
who is not separated from employment at the time 
of such distribution.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions in plan years be-
ginning after December 31, 2006. 
SEC. 906. TREATMENT OF CERTAIN PENSION PLANS OF IN-
DIAN TRIBAL GOVERNMENTS. 
(a) DEFINITION
OF GOVERNMENT PLAN TO IN-
CLUDE CERTAIN PENSION PLANS
OF INDIAN TRIBAL 
GOVERNMENTS.— 
(1) AMENDMENT TO INTERNAL REVENUE CODE 
OF 1986.—Section 414(d) of the Internal Revenue 
Code of 1986 (defining governmental plan) is 
amended by adding at the end the following: ‘‘The 
term ‘governmental plan’ includes a plan which is 
established and maintained by an Indian tribal gov-
ernment (as defined in section 7701(a)(40)), a sub-
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division of an Indian tribal government (determined 
in accordance with section 7871(d)), or an agency or 
instrumentality of either, and all of the participants 
of which are employees of such entity substantially 
all of whose services as such an employee are in the 
performance of essential governmental functions but 
not in the performance of commercial activities 
(whether or not an essential government function).’’. 
(2) AMENDMENT TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.— 
(A) Section 3(32) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 
1002(32)) is amended by adding at the end the 
following: ‘‘The term ‘governmental plan’ in-
cludes a plan which is established and main-
tained by an Indian tribal government (as de-
fined in section 7701(a)(40) of the Internal 
Revenue Code of 1986), a subdivision of an In-
dian tribal government (determined in accord-
ance with section 7871(d) of such Code), or an 
agency or instrumentality of either, and all of 
the participants of which are employees of such 
entity substantially all of whose services as such 
an employee are in the performance of essential 
governmental functions but not in the perform-
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ance of commercial activities (whether or not an 
essential government function)’’. 
(B) Section 4021(b)(2) of such Act is 
amended by adding at the end the following: 
‘‘or which is described in the last sentence of 
section 3(32)’’. 
(b) CLARIFICATION THAT TRIBAL GOVERNMENTS 
ARE SUBJECT TO THE SAME PENSION PLAN RULES AND 
REGULATIONS APPLIED TO STATE AND OTHER LOCAL 
GOVERNMENTS
AND
THEIR
POLICE
AND
FIRE-
FIGHTERS.— 
(1) AMENDMENTS
TO
INTERNAL
REVENUE 
CODE OF 1986.— 
(A) POLICE
AND
FIREFIGHTERS.—Sub-
paragraph (H) section 415(b)(2) of the Internal 
Revenue Code of 1986 (defining participant) is 
amended— 
(i) in clause (i), by striking ‘‘State or 
political subdivision’’ and inserting ‘‘State, 
Indian tribal government (as defined in 
section 7701(a)(40)), or any political sub-
division’’; and 
(ii) in clause (ii)(I), by striking ‘‘State 
or political subdivision’’ each place it ap-
pears and inserting ‘‘State, Indian tribal 
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government (as so defined), or any political 
subdivision’’. 
(B) STATE
AND
LOCAL
GOVERNMENT 
PLANS.— 
(i) IN GENERAL.—Subparagraph (A) 
of section 415(b)(10) of such Code (relat-
ing to limitation to equal accrued benefit) 
is amended by inserting ‘‘or a govern-
mental plan described in the last sentence 
of section 414(d) (relating to plans of In-
dian tribal governments),’’ after ‘‘fore-
going,’’. 
(ii) CONFORMING AMENDMENT.—The 
heading of paragraph (1) of section 415(b) 
of such Code is amended by striking ‘‘SPE-
CIAL RULE FOR STATE AND’’ and inserting 
‘‘SPECIAL RULE FOR STATE, INDIAN TRIB-
AL, AND’’. 
(C) GOVERNMENT
PICK
UP
CONTRIBU-
TIONS.—Paragraph (2) of section 414(h) of 
such Code (relating to designation by units of 
government) is amended by inserting ‘‘or a gov-
ernmental plan described in the last sentence of 
section 414(d) (relating to plans of Indian trib-
al governments),’’ after ‘‘foregoing,’’. 
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(2) AMENDMENTS TO EMPLOYEE RETIREMENT 
INCOME SECURITY ACT OF 1974.—Section 4021(b) of 
the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1321(b)) is amended— 
(A) in paragraph (12), by striking ‘‘or’’ at 
the end; 
(B) in paragraph (13), by striking ‘‘plan.’’ 
and inserting ‘‘plan; or’’; and 
(C) by adding at the end the following: 
‘‘(14) established and maintained by an Indian 
tribal government (as defined in section 7701(a)(40) 
of the Internal Revenue Code of 1986), a subdivision 
of an Indian tribal government (determined in ac-
cordance with section 7871(d) of such Code), or an 
agency or instrumentality of either, and all of the 
participants of which are employees of such entity 
substantially all of whose services as such an em-
ployee are in the performance of essential govern-
mental functions but not in the performance of com-
mercial activities (whether or not an essential gov-
ernment function).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any year beginning on or after 
the date of the enactment of this Act. 
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TITLE 
X—PROVISIONS 
RELAT-
ING TO SPOUSAL PENSION 
PROTECTION 
SEC. 
1001. 
REGULATIONS 
ON 
TIME 
AND 
ORDER 
OF 
ISSUANCE OF DOMESTIC RELATIONS OR-
DERS. 
Not later than 1 year after the date of the enactment 
of this Act, the Secretary of Labor shall issue regulations 
under section 206(d)(3) of the Employee Retirement Secu-
rity Act of 1974 and section 414(p) of the Internal Rev-
enue Code of 1986 which clarify that— 
(1) a domestic relations order otherwise meet-
ing the requirements to be a qualified domestic rela-
tions order, including the requirements of section 
206(d)(3)(D) of such Act and section 414(p)(3) of 
such Code, shall not fail to be treated as a qualified 
domestic relations order solely because— 
(A) the order is issued after, or revises, an-
other domestic relations order or qualified do-
mestic relations order; or 
(B) of the time at which it is issued; and 
(2) any order described in paragraph (1) shall 
be subject to the same requirements and protections 
which apply to qualified domestic relations orders, 
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including the provisions of section 206(d)(3)(H) of 
such Act and section 414(p)(7) of such Code. 
SEC. 1002. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL-
ROAD 
RETIREMENT 
ANNUITIES 
INDE-
PENDENT OF ACTUAL ENTITLEMENT OF EM-
PLOYEE. 
(a) IN GENERAL.—Section 2 of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231a) is amended— 
(1) in subsection (c)(4)(i), by striking ‘‘(A) is 
entitled to an annuity under subsection (a)(1) and 
(B)’’; and 
(2) in subsection (e)(5), by striking ‘‘or di-
vorced wife’’ the second place it appears. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect 1 year after the date of the 
enactment of this Act. 
SEC. 1003. EXTENSION OF TIER II RAILROAD RETIREMENT 
BENEFITS TO SURVIVING FORMER SPOUSES 
PURSUANT TO DIVORCE AGREEMENTS. 
(a) IN GENERAL.—Section 5 of the Railroad Retire-
ment Act of 1974 (45 U.S.C. 231d) is amended by adding 
at the end the following: 
‘‘(d) Notwithstanding any other provision of law, the 
payment of any portion of an annuity computed under sec-
tion 3(b) to a surviving former spouse in accordance with 
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a court decree of divorce, annulment, or legal separation 
or the terms of any court-approved property settlement 
incident to any such court decree shall not be terminated 
upon the death of the individual who performed the service 
with respect to which such annuity is so computed unless 
such termination is otherwise required by the terms of 
such court decree.’’ 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect 1 year after the date of the 
enactment of this Act. 
SEC. 1004. REQUIREMENT FOR ADDITIONAL SURVIVOR AN-
NUITY OPTION. 
(a) AMENDMENTS TO INTERNAL REVENUE CODE.— 
(1) ELECTION OF SURVIVOR ANNUITY.—Section 
417(a)(1)(A) of the Internal Revenue Code of 1986 
is amended— 
(A) in clause (i), by striking ‘‘, and’’ and 
inserting a comma; 
(B) by redesignating clause (ii) as clause 
(iii); and 
(C) by inserting after clause (i) the fol-
lowing: 
‘‘(ii) if the participant elects a waiver 
under clause (i), may elect the qualified op-
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ccoleman on PROD1PC71 with BILLS
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tional survivor annuity at any time during the 
applicable election period, and’’. 
(2) DEFINITION.—Section 417 of such Code is 
amended by adding at the end the following: 
‘‘(g) DEFINITION
OF QUALIFIED OPTIONAL SUR-
VIVOR ANNUITY.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified optional survivor annuity’ 
means an annuity— 
‘‘(A) for the life of the participant with a 
survivor annuity for the life of the spouse which 
is equal to the applicable percentage of the 
amount of the annuity which is payable during 
the joint lives of the participant and the spouse, 
and 
‘‘(B) which is the actuarial equivalent of a 
single annuity for the life of the participant. 
Such term also includes any annuity in a form hav-
ing the effect of an annuity described in the pre-
ceding sentence. 
‘‘(2) APPLICABLE PERCENTAGE.— 
‘‘(A) IN GENERAL.—For purposes of para-
graph (1), if the survivor annuity percentage— 
‘‘(i) is less than 75 percent, the appli-
cable percentage is 75 percent, and 
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‘‘(ii) is greater than or equal to 75 
percent, the applicable percentage is 50 
percent. 
‘‘(B) SURVIVOR ANNUITY PERCENTAGE.— 
For purposes of subparagraph (A), the term 
‘survivor annuity percentage’ means the per-
centage which the survivor annuity under the 
plan’s qualified joint and survivor annuity bears 
to the annuity payable during the joint lives of 
the participant and the spouse.’’. 
(3) NOTICE.—Section 417(a)(3)(A)(i) of such 
Code is amended by inserting ‘‘and of the qualified 
optional survivor annuity’’ after ‘‘annuity’’. 
(b) AMENDMENTS TO ERISA.— 
(1) ELECTION OF SURVIVOR ANNUITY.—Section 
205(c)(1)(A) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1055(c)(1)(A)) is 
amended— 
(A) in clause (i), by striking ‘‘, and’’ and 
inserting a comma; 
(B) by redesignating clause (ii) as clause 
(iii); and 
(C) by inserting after clause (i) the fol-
lowing: 
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ccoleman on PROD1PC71 with BILLS
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‘‘(ii) if the participant elects a waiver 
under clause (i), may elect the qualified op-
tional survivor annuity at any time during the 
applicable election period, and’’. 
(2) DEFINITION.—Section 205(d) of such Act 
(29 U.S.C. 1055(d)) is amended— 
(A) by inserting ‘‘(1)’’ after ‘‘(d)’’; 
(B) by redesignating paragraphs (1) and 
(2) as subparagraphs (A) and (B), respectively; 
and 
(C) by adding at the end the following: 
‘‘(2)(A) For purposes of this section, the term ‘quali-
fied optional survivor annuity’ means an annuity— 
‘‘(i) for the life of the participant with a sur-
vivor annuity for the life of the spouse which is 
equal to the applicable percentage of the amount of 
the annuity which is payable during the joint lives 
of the participant and the spouse, and 
‘‘(ii) which is the actuarial equivalent of a sin-
gle annuity for the life of the participant. 
Such term also includes any annuity in a form having the 
effect of an annuity described in the preceding sentence. 
‘‘(B)(i) For purposes of subparagraph (A), if the sur-
vivor annuity percentage— 
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‘‘(I) is less than 75 percent, the applicable per-
centage is 75 percent, and 
‘‘(II) is greater than or equal to 75 percent, the 
applicable percentage is 50 percent. 
‘‘(ii) For purposes of clause (i), the term ‘survivor 
annuity percentage’ means the percentage which the sur-
vivor annuity under the plan’s qualified joint and survivor 
annuity bears to the annuity payable during the joint lives 
of the participant and the spouse.’’. 
(3) NOTICE.—Section 205(c)(3)(A)(i) of such 
Act (29 U.S.C. 1055(c)(3)(A)(i)) is amended by in-
serting ‘‘and of the qualified optional survivor annu-
ity’’ after ‘‘annuity’’. 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to plan years beginning after 
December 31, 2007. 
(2) SPECIAL
RULE
FOR
COLLECTIVELY
BAR-
GAINED PLANS.—In the case of a plan maintained 
pursuant to 1 or more collective bargaining agree-
ments between employee representatives and 1 or 
more employers ratified on or before the date of the 
enactment of this Act, the amendments made by this 
section shall not apply to plan years beginning be-
fore the earlier of— 
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(A) the later of— 
(i) January 1, 2008, or 
(ii) the date on which the last collec-
tive bargaining agreement related to the 
plan terminates (determined without re-
gard to any extension thereof after the 
date of enactment of this Act), or 
(B) January 1, 2009. 
TITLE XI—ADMINISTRATIVE 
PROVISIONS 
SEC. 1101. EMPLOYEE PLANS COMPLIANCE RESOLUTION 
SYSTEM. 
(a) IN GENERAL.—The Secretary of the Treasury 
shall have full authority to establish and implement the 
Employee Plans Compliance Resolution System (or any 
successor program) and any other employee plans correc-
tion policies, including the authority to waive income, ex-
cise, or other taxes to ensure that any tax, penalty, or 
sanction is not excessive and bears a reasonable relation-
ship to the nature, extent, and severity of the failure. 
(b) IMPROVEMENTS.—The Secretary of the Treasury 
shall continue to update and improve the Employee Plans 
Compliance Resolution System (or any successor pro-
gram), giving special attention to— 
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(1) increasing the awareness and knowledge of 
small employers concerning the availability and use 
of the program; 
(2) taking into account special concerns and 
circumstances that small employers face with respect 
to compliance and correction of compliance failures; 
(3) extending the duration of the self-correction 
period under the Self-Correction Program for signifi-
cant compliance failures; 
(4) expanding the availability to correct insig-
nificant compliance failures under the Self-Correc-
tion Program during audit; and 
(5) assuring that any tax, penalty, or sanction 
that is imposed by reason of a compliance failure is 
not excessive and bears a reasonable relationship to 
the nature, extent, and severity of the failure. 
SEC. 1102. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS. 
(a) EXPANSION OF PERIOD.— 
(1) AMENDMENT
OF
INTERNAL
REVENUE 
CODE.— 
(A) IN GENERAL.—Section 417(a)(6)(A) of 
the Internal Revenue Code of 1986 is amended 
by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 
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760 
(B) MODIFICATION
OF
REGULATIONS.— 
The Secretary of the Treasury shall modify the 
regulations under sections 402(f), 411(a)(11), 
and 417 of the Internal Revenue Code of 1986 
by substituting ‘‘180 days’’ for ‘‘90 days’’ each 
place it appears in Treasury Regulations sec-
tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)– 
1(b). 
(2) AMENDMENT OF ERISA.— 
(A) IN GENERAL.—Section 205(c)(7)(A) of 
the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended 
by striking ‘‘90-day’’ and inserting ‘‘180-day’’. 
(B) MODIFICATION
OF
REGULATIONS.— 
The Secretary of the Treasury shall modify the 
regulations under part 2 of subtitle B of title 
I of the Employee Retirement Income Security 
Act of 1974 relating to sections 203(e) and 205 
of such Act by substituting ‘‘180 days’’ for ‘‘90 
days’’ each place it appears. 
(3) EFFECTIVE DATE.—The amendments and 
modifications made or required by this subsection 
shall apply to years beginning after December 31, 
2006. 
(b) NOTIFICATION OF RIGHT TO DEFER.— 
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761 
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section 
411(a)(11) of the Internal Revenue Code of 1986 
and under section 205 of the Employee Retirement 
Income Security Act of 1974 to provide that the de-
scription of a participant’s right, if any, to defer re-
ceipt of a distribution shall also describe the con-
sequences of failing to defer such receipt. 
(2) EFFECTIVE DATE.— 
(A) IN GENERAL.—The modifications re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2006. 
(B) REASONABLE NOTICE.—A plan shall 
not be treated as failing to meet the require-
ments of section 411(a)(11) of such Code or 
section 205 of such Act with respect to any de-
scription of consequences described in para-
graph (1) made within 90 days after the Sec-
retary of the Treasury issues the modifications 
required by paragraph (1) if the plan adminis-
trator makes a reasonable attempt to comply 
with such requirements. 
SEC. 1103. REPORTING SIMPLIFICATION. 
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR 
OWNERS AND THEIR SPOUSES.— 
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(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual 
returns with respect to one-participant retirement 
plans to ensure that such plans with assets of 
$250,000 or less as of the close of the plan year 
need not file a return for that year. 
(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term 
‘‘one-participant retirement plan’’ means a retire-
ment plan with respect to which the following re-
quirements are met: 
(A) on the first day of the plan year— 
(i) the plan covered only one indi-
vidual (or the individual and the individ-
ual’s spouse) and the individual owned 100 
percent of the plan sponsor (whether or 
not incorporated), or 
(ii) the plan covered only one or more 
partners (or partners and their spouses) in 
the plan sponsor; 
(B) the plan meets the minimum coverage 
requirements of section 410(b) of the Internal 
Revenue Code of 1986 without being combined 
with any other plan of the business that covers 
the employees of the business; 
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(C) the plan does not provide benefits to 
anyone except the individual (and the individ-
ual’s spouse) or the partners (and their 
spouses); 
(D) the plan does not cover a business that 
is a member of an affiliated service group, a 
controlled group of corporations, or a group of 
businesses under common control; and 
(E) the plan does not cover a business that 
uses the services of leased employees (within 
the meaning of section 414(n) of such Code). 
For purposes of this paragraph, the term ‘‘partner’’ 
includes a 2-percent shareholder (as defined in sec-
tion 1372(b) of such Code) of an S corporation. 
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the 
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section. 
(4) EFFECTIVE DATE.—The provisions of this 
subsection shall apply to plan years beginning on or 
after January 1, 2007. 
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR 
PLANS WITH FEWER THAN 25 PARTICIPANTS.—In the 
case of plan years beginning after December 31, 2006, the 
Secretary of the Treasury and the Secretary of Labor shall 
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provide for the filing of a simplified annual return for any 
retirement plan which covers less than 25 participants on 
the first day of a plan year and which meets the require-
ments described in subparagraphs (B), (D), and (E) of 
subsection (a)(2). 
SEC. 1104. VOLUNTARY EARLY RETIREMENT INCENTIVE 
AND EMPLOYMENT RETENTION PLANS MAIN-
TAINED BY LOCAL EDUCATIONAL AGENCIES 
AND OTHER ENTITIES. 
(a) VOLUNTARY EARLY RETIREMENT INCENTIVE 
PLANS.— 
(1) TREATMENT AS PLAN PROVIDING SEVER-
ANCE PAY.—Section 457(e)(11) of the Internal Rev-
enue Code of 1986 (relating to certain plans ex-
cluded) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(D) CERTAIN VOLUNTARY EARLY RETIRE-
MENT INCENTIVE PLANS.— 
‘‘(i) IN
GENERAL.—If an applicable 
voluntary early retirement incentive plan— 
‘‘(I) makes payments or supple-
ments as an early retirement benefit, 
a retirement-type subsidy, or a benefit 
described in the last sentence of sec-
tion 411(a)(9), and 
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‘‘(II) such payments or supple-
ments are made in coordination with 
a defined benefit plan which is de-
scribed in section 401(a) and includes 
a trust exempt from tax under section 
501(a) and which is maintained by an 
eligible employer described in para-
graph (1)(A) or by an education asso-
ciation described in clause (ii)(II), 
such applicable plan shall be treated for 
purposes of subparagraph (A)(i) as a bona 
fide severance pay plan with respect to 
such payments or supplements to the ex-
tent such payments or supplements could 
otherwise have been provided under such 
defined benefit plan (determined as if sec-
tion 411 applied to such defined benefit 
plan). 
‘‘(ii) APPLICABLE VOLUNTARY EARLY 
RETIREMENT INCENTIVE PLAN.—For pur-
poses of this subparagraph, the term ‘ap-
plicable voluntary early retirement incen-
tive plan’ means a voluntary early retire-
ment incentive plan maintained by— 
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‘‘(I) a local educational agency 
(as defined in section 9101 of the Ele-
mentary and Secondary Education 
Act of 1965 (20 U.S.C. 7801)), or 
‘‘(II) an education association 
which principally represents employees 
of 1 or more agencies described in 
subclause (I) and which is described 
in section 501(c) (5) or (6) and ex-
empt from tax under section 501(a).’’ 
(2) AGE
DISCRIMINATION
IN
EMPLOYMENT 
ACT.—Section 4(l)(1) of the Age Discrimination in 
Employment Act of 1967 (29 U.S.C. 623(l)(1)) is 
amended— 
(A) by inserting ‘‘(A)’’ after ‘‘(1)’’, 
(B) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively, 
(C) by redesignating clauses (i) and (ii) of 
subparagraph (B) (as in effect before the 
amendments made by subparagraph (B)) as 
subclauses (I) and (II), respectively, and 
(D) by adding at the end the following: 
‘‘(B) A voluntary early retirement incentive 
plan that— 
‘‘(i) is maintained by— 
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‘‘(I) a local educational agency (as de-
fined in section 9101 of the Elementary 
and Secondary Education Act of 1965 (20 
U.S.C. 7801), or 
‘‘(II) an education association which 
principally represents employees of 1 or 
more agencies described in subclause (I) 
and which is described in section 501(c) 
(5) or (6) of the Internal Revenue Code of 
1986 and exempt from taxation under sec-
tion 501(a) of such Code, and 
‘‘(ii) makes payments or supplements de-
scribed in subclauses (I) and (II) of subpara-
graph (A)(ii) in coordination with a defined 
benefit plan (as so defined) maintained by an 
eligible 
employer 
described 
in 
section 
457(e)(1)(A) of such Code or by an education 
association described in clause (i)(II), 
shall be treated solely for purposes of subparagraph 
(A)(ii) as if it were a part of the defined benefit plan 
with respect to such payments or supplements. Pay-
ments or supplements under such a voluntary early 
retirement incentive plan shall not constitute sever-
ance pay for purposes of paragraph (2).’’. 
(b) EMPLOYMENT RETENTION PLANS.— 
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(1) IN GENERAL.—Section 457(f)(2) of the In-
ternal Revenue Code of 1986 (relating to exceptions) 
is amended by striking ‘‘and’’ at the end of subpara-
graph (D), by striking the period at the end of sub-
paragraph (E) and inserting ‘‘, and’’, and by adding 
at the end the following: 
‘‘(F) that portion of any applicable employ-
ment retention plan described in paragraph (4) 
with respect to any participant.’’ 
(2) DEFINITIONS AND RULES RELATING TO EM-
PLOYMENT RETENTION PLANS.—Section 457(f) of 
such Code is amended by adding at the end the fol-
lowing new paragraph: 
‘‘(4) EMPLOYMENT
RETENTION
PLANS.—For 
purposes of paragraph (2)(F)— 
‘‘(A) IN GENERAL.—The portion of an ap-
plicable employment retention plan described in 
this paragraph with respect to any participant 
is that portion of the plan which provides bene-
fits payable to the participant not in excess of 
twice the applicable dollar limit determined 
under subsection (e)(15). 
‘‘(B) OTHER RULES.— 
‘‘(i) LIMITATION.—Paragraph (2)(F) 
shall only apply to the portion of the plan 
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described in subparagraph (A) for years 
preceding the year in which such portion is 
paid or otherwise made available to the 
participant. 
‘‘(ii) TREATMENT.—A plan shall not 
be treated for purposes of this title as pro-
viding for the deferral of compensation for 
any year with respect to the portion of the 
plan described in subparagraph (A). 
‘‘(C) APPLICABLE
EMPLOYMENT
RETEN-
TION PLAN.—The term ‘applicable employment 
retention plan’ means an employment retention 
plan maintained by— 
‘‘(i) a local educational agency (as de-
fined in section 9101 of the Elementary 
and Secondary Education Act of 1965 (20 
U.S.C. 7801), or 
‘‘(ii) an education association which 
principally represents employees of 1 or 
more agencies described in clause (i) and 
which is described in section 501(c) (5) or 
(6) and exempt from taxation under sec-
tion 501(a). 
‘‘(D) EMPLOYMENT
RETENTION
PLAN.— 
The term ‘employment retention plan’ means a 
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plan to pay, upon termination of employment, 
compensation to an employee of a local edu-
cational agency or education association de-
scribed in subparagraph (C) for purposes of— 
‘‘(i) retaining the services of the em-
ployee, or 
‘‘(ii) rewarding such employee for the 
employee’s service with 1 or more such 
agencies or associations.’’. 
(c) COORDINATION WITH ERISA.—Section 3(2)(B) 
of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1002(2)(B)) is amended by adding at the end 
the following: ‘‘An applicable voluntary early retirement 
incentive plan (as defined in section 457(e)(11)(D)(ii) of 
the Internal Revenue Code of 1986) making payments or 
supplements described in section 457(e)(11)(D)(i) of such 
Code, and an applicable employment retention plan (as de-
fined in section 457(f)(4)(C) of such Code) making pay-
ments of benefits described in section 457(f)(4)(A) of such 
Code, shall, for purposes of this title, be treated as a wel-
fare plan (and not a pension plan) with respect to such 
payments and supplements.’’ 
(d) EFFECTIVE DATES.— 
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771 
(1) IN GENERAL.—The amendments made by 
this Act shall take effect on the date of the enact-
ment of this Act. 
(2) 
TAX
AMENDMENTS.—The 
amendments 
made by subsections (a)(1) and (b) shall apply to 
taxable years ending after the date of the enactment 
of this Act. 
(3) ERISA AMENDMENTS.—The amendment 
made by subsection (c) shall apply to plan years 
ending after the date of the enactment of this Act. 
(4) CONSTRUCTION.—Nothing in the amend-
ments made by this section shall alter or affect the 
construction of the Internal Revenue Code of 1986, 
the Employee Retirement Income Security Act of 
1974, or the Age Discrimination in Employment Act 
of 1967 as applied to any plan, arrangement, or con-
duct to which such amendments do not apply. 
SEC. 1105. NO REDUCTION IN UNEMPLOYMENT COMPENSA-
TION AS A RESULT OF PENSION ROLLOVERS. 
(a) IN GENERAL.—Section 3304(a) of the Internal 
Revenue Code of 1986 (relating to requirements for State 
unemployment laws) is amended by adding at the end the 
following new flush sentence: 
‘‘Compensation shall not be reduced under paragraph (15) 
for any pension, retirement or retired pay, annuity, or 
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similar payment which is not includible in gross income 
of the individual for the taxable year in which paid because 
it was part of a rollover distribution.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to weeks beginning on or after the 
date of the enactment of this Act. 
SEC. 1106. REVOCATION OF ELECTION RELATING TO 
TREATMENT AS MULTIEMPLOYER PLAN. 
(a) AMENDMENT TO ERISA.—Section 3(37) of the 
Employee Retirement Income Security Act of 1974 is 
amended by adding at the end the following new subpara-
graph (G): 
‘‘(G)(i) Within 1 year after the enactment of 
the Pension Protection Act of 2006— 
‘‘(I) an election under subparagraph (E) 
may be revoked, pursuant to procedures pre-
scribed by the Pension Benefit Guaranty Cor-
poration, if, for each of the 3 plan years prior 
to the date of the enactment of that Act, the 
plan would have been a multiemployer plan but 
for the election under subparagraph (E), and 
‘‘(II) a plan that meets the criteria in 
clauses (i) and (ii) of subparagraph (A) of this 
paragraph or that is described in clause (vi) 
may, pursuant to procedures prescribed by the 
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Pension Benefit Guaranty Corporation, elect to 
be a multiemployer plan, if— 
‘‘(aa) for each of the 3 plan years im-
mediately before the date of the enactment 
of the Pension Protection Act of 2006, the 
plan has met those criteria or is so de-
scribed, 
‘‘(bb) substantially all of the plan’s 
employer contributions for each of those 
plan years were made or required to be 
made by organizations that were exempt 
from tax under section 501 of the Internal 
Revenue Code of 1986, and 
‘‘(cc) the plan was established prior to 
September 2, 1974. 
‘‘(ii) An election under this paragraph shall be 
effective for all purposes under this Act and under 
the Internal Revenue Code of 1986, starting with 
the first plan year ending after the date of the en-
actment of the Pension Protection Act of 2006. 
‘‘(iii) Once made, an election under this para-
graph shall be irrevocable, except that a plan de-
scribed in subclause (i)(II) shall cease to be a multi-
employer plan as of the plan year beginning imme-
diately after the first plan year for which the major-
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ity of its employer contributions were made or re-
quired to be made by organizations that were not ex-
empt from tax under section 501 of the Internal 
Revenue Code of 1986. 
‘‘(iv) The fact that a plan makes an election 
under clause (i)(II) does not imply that the plan was 
not a multiemployer plan prior to the date of the 
election or would not be a multiemployer plan with-
out regard to the election. 
‘‘(v)(I) No later than 30 days before an election 
is made under this paragraph, the plan adminis-
trator shall provide notice of the pending election to 
each plan participant and beneficiary, each labor or-
ganization representing such participants or bene-
ficiaries, and each employer that has an obligation 
to contribute to the plan, describing the principal 
differences between the guarantee programs under 
title IV and the benefit restrictions under this title 
for single employer and multiemployer plans, along 
with such other information as the plan adminis-
trator chooses to include. 
‘‘(II) Within 180 days after the date of enact-
ment of the Pension Protection Act of 2006, the 
Secretary shall prescribe a model notice under this 
subparagraph. 
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‘‘(III) A plan administrator’s failure to provide 
the notice required under this subparagraph shall be 
treated for purposes of section 502(c)(2) as a failure 
or refusal by the plan administrator to file the an-
nual report required to be filed with the Secretary 
under section 101(b)(4). 
‘‘(vi) A plan is described in this clause if it is 
a plan— 
‘‘(I) that was established in Chicago, Illi-
nois, on August 12, 1881; and 
‘‘(II) sponsored by an organization de-
scribed in section 501(c)(5) of the Internal Rev-
enue Code of 1986 and exempt from tax under 
section 501(a) of such Code.’’. 
(b) AMENDMENT TO INTERNAL REVENUE CODE.— 
Subsection (f) of section 414 of the Internal Revenue Code 
of 1986 is amended by adding at the end the following 
new paragraph (6): 
‘‘(6) ELECTION
WITH
REGARD
TO
MULTIEM-
PLOYER STATUS.— 
‘‘(A) Within 1 year after the enactment of 
the Pension Protection Act of 2006— 
‘‘(i) An election under paragraph (5) 
may be revoked, pursuant to procedures 
prescribed by the Pension Benefit Guar-
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anty Corporation, if, for each of the 3 plan 
years prior to the date of the enactment of 
that Act, the plan would have been a mul-
tiemployer plan but for the election under 
paragraph (5), and 
‘‘(ii) a plan that meets the criteria in 
subparagraph (A) and (B) of paragraph 
(1) of this subsection or that is described 
in subparagraph (E) may, pursuant to pro-
cedures prescribed by the Pension Benefit 
Guaranty Corporation, elect to be a multi-
employer plan, if— 
‘‘(I) for each of the 3 plan years 
immediately before the date of enact-
ment of the Pension Protection Act of 
2006, the plan has met those criteria 
or is so described, 
‘‘(II) substantially all of the 
plan’s employer contributions for each 
of those plan years were made or re-
quired to be made by organizations 
that were exempt from tax under sec-
tion 501, and 
‘‘(III) the plan was established 
prior to September 2, 1974. 
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‘‘(B) An election under this paragraph 
shall be effective for all purposes under this Act 
and under the Employee Retirement Income Se-
curity Act of 1974, starting with the first plan 
year ending after the date of the enactment of 
the Pension Protection Act of 2006. 
‘‘(C) Once made, an election under this 
paragraph shall be irrevocable, except that a 
plan described in subparagraph (A)(ii) shall 
cease to be a multiemployer plan as of the plan 
year beginning immediately after the first plan 
year for which the majority of its employer con-
tributions were made or required to be made by 
organizations that were not exempt from tax 
under section 501. 
‘‘(D) The fact that a plan makes an elec-
tion under subparagraph (A)(ii) does not imply 
that the plan was not a multiemployer plan 
prior to the date of the election or would not be 
a multiemployer plan without regard to the 
election. 
‘‘(E) A plan is described in this subpara-
graph if it is a plan— 
‘‘(i) that was established in Chicago, 
Illinois, on August 12, 1881; and 
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‘‘(ii) sponsored by an organization de-
scribed in section 501(c)(5) and exempt 
from tax under section 501(a).’’. 
SEC. 1107. PROVISIONS RELATING TO PLAN AMENDMENTS. 
(a) IN GENERAL.—If this section applies to any pen-
sion plan or contract amendment— 
(1) such pension plan or contract shall be treat-
ed as being operated in accordance with the terms 
of the plan during the period described in subsection 
(b)(2)(A), and 
(2) except as provided by the Secretary of the 
Treasury, such pension plan shall not fail to meet 
the requirements of section 411(d)(6) of the Internal 
Revenue Code of 1986 and section 204(g) of the 
Employee Retirement Income Security Act of 1974 
by reason of such amendment. 
(b) AMENDMENTS TO WHICH SECTION APPLIES.— 
(1) IN GENERAL.—This section shall apply to 
any amendment to any pension plan or annuity con-
tract which is made— 
(A) pursuant to any amendment made by 
this Act or pursuant to any regulation issued by 
the Secretary of the Treasury or the Secretary 
of Labor under this Act, and 
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(B) on or before the last day of the first 
plan year beginning on or after January 1, 
2009. 
In the case of a governmental plan (as defined in 
section 414(d) of the Internal Revenue Code of 
1986), this paragraph shall be applied by sub-
stituting ‘‘2011’’ for ‘‘2009’’. 
(2) CONDITIONS.—This section shall not apply 
to any amendment unless— 
(A) during the period— 
(i) beginning on the date the legisla-
tive or regulatory amendment described in 
paragraph (1)(A) takes effect (or in the 
case of a plan or contract amendment not 
required by such legislative or regulatory 
amendment, the effective date specified by 
the plan), and 
(ii) ending on the date described in 
paragraph (1)(B) (or, if earlier, the date 
the plan or contract amendment is adopt-
ed), the plan or contract is operated as if 
such plan or contract amendment were in 
effect; and 
(B) such plan or contract amendment ap-
plies retroactively for such period. 
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TITLE XII—PROVISIONS RELAT-
ING TO EXEMPT ORGANIZA-
TIONS 
Subtitle A—Charitable Giving 
Incentives 
SEC. 1201. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL 
RETIREMENT PLANS FOR CHARITABLE PUR-
POSES. 
(a) IN GENERAL.—Subsection (d) of section 408 (re-
lating to individual retirement accounts) is amended by 
adding at the end the following new paragraph: 
‘‘(8) DISTRIBUTIONS
FOR
CHARITABLE
PUR-
POSES.— 
‘‘(A) IN GENERAL.—So much of the aggre-
gate amount of qualified charitable distributions 
with respect to a taxpayer made during any 
taxable year which does not exceed $100,000 
shall not be includible in gross income of such 
taxpayer for such taxable year. 
‘‘(B) QUALIFIED
CHARITABLE
DISTRIBU-
TION.—For purposes of this paragraph, the 
term ‘qualified charitable distribution’ means 
any distribution from an individual retirement 
plan (other than a plan described in subsection 
(k) or (p))— 
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‘‘(i) which is made directly by the 
trustee to an organization described in sec-
tion 170(b)(1)(A) (other than any organi-
zation described in section 509(a)(3) or 
any fund or account described in section 
4966(d)(2)), and 
‘‘(ii) which is made on or after the 
date that the individual for whose benefit 
the plan is maintained has attained age 
701⁄2. 
A distribution shall be treated as a qualified 
charitable distribution only to the extent that 
the distribution would be includible in gross in-
come without regard to subparagraph (A). 
‘‘(C) CONTRIBUTIONS
MUST
BE
OTHER-
WISE DEDUCTIBLE.—For purposes of this para-
graph, a distribution to an organization de-
scribed in subparagraph (B)(i) shall be treated 
as a qualified charitable distribution only if a 
deduction for the entire distribution would be 
allowable under section 170 (determined with-
out regard to subsection (b) thereof and this 
paragraph). 
‘‘(D) APPLICATION OF SECTION 72.—Not-
withstanding section 72, in determining the ex-
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tent to which a distribution is a qualified chari-
table distribution, the entire amount of the dis-
tribution shall be treated as includible in gross 
income without regard to subparagraph (A) to 
the extent that such amount does not exceed 
the aggregate amount which would have been so 
includible if all amounts distributed from all in-
dividual retirement plans were treated as 1 con-
tract under paragraph (2)(A) for purposes of 
determining the inclusion of such distribution 
under section 72. Proper adjustments shall be 
made in applying section 72 to other distribu-
tions in such taxable year and subsequent tax-
able years. 
‘‘(E) DENIAL
OF
DEDUCTION.—Qualified 
charitable distributions which are not includible 
in gross income pursuant to subparagraph (A) 
shall not be taken into account in determining 
the deduction under section 170. 
‘‘(F) TERMINATION.—This paragraph shall 
not apply to distributions made in taxable years 
beginning after December 31, 2007.’’. 
(b) MODIFICATIONS RELATING TO INFORMATION RE-
TURNS BY CERTAIN TRUSTS.— 
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(1) RETURNS.—Section 6034 (relating to re-
turns by trusts described in section 4947(a)(2) or 
claiming charitable deductions under section 642(c)) 
is amended to read as follows: 
‘‘SEC. 6034. RETURNS BY CERTAIN TRUSTS. 
‘‘(a) SPLIT-INTEREST TRUSTS.—Every trust de-
scribed in section 4947(a)(2) shall furnish such informa-
tion 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 regu-
lations 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, 
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‘‘(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, 
‘‘(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 
beginning 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, de-
termined under the applicable principles of the 
law of trusts, is required to be distributed cur-
rently to the beneficiaries, or 
‘‘(B) the trust is described in section 
4947(a)(1).’’. 
(2) INCREASE IN PENALTY RELATING TO FIL-
ING OF INFORMATION RETURN BY SPLIT-INTEREST 
TRUSTS.—Paragraph (2) of section 6652(c) (relating 
to returns by exempt organizations and by certain 
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trusts) is amended by adding at the end the fol-
lowing new subparagraph: 
‘‘(C) SPLIT-INTEREST
TRUSTS.—In the 
case of a trust which is required to file a return 
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 
second 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 sentence of paragraph (1)(A) shall be 
applied by substituting ‘$100’ for ‘$20’, 
and the second sentence thereof shall be 
applied by substituting ‘$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 
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on such person who shall be personally liable 
for such penalty.’’. 
(3) CONFIDENTIALITY
OF
NONCHARITABLE 
BENEFICIARIES.—Subsection (b) of section 6104 
(relating to inspection of annual information re-
turns) is amended by adding at the end the fol-
lowing new sentence: ‘‘In the case of a trust which 
is required to file a return under section 6034(a), 
this subsection shall not apply to information re-
garding beneficiaries which are not organizations de-
scribed in section 170(c).’’. 
(4) CLERICAL AMENDMENT.—The item in the 
table of sections for subpart A of part III of sub-
chapter A of chapter 61 relating to section 6034 is 
amended to read as follows: 
‘‘Sec. 6034. Returns by certain trusts.’’. 
(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, 2006. 
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SEC. 1202. EXTENSION OF MODIFICATION OF CHARITABLE 
DEDUCTION FOR CONTRIBUTIONS OF FOOD 
INVENTORY. 
(a) IN GENERAL.—Section 170(e)(3)(C)(iv) (relating 
to termination) is amended by striking ‘‘2005’’ and insert-
ing ‘‘2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after De-
cember 31, 2005. 
SEC. 1203. 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 
shareholder’s pro rata share of the adjusted basis of 
such property. The preceding sentence shall not 
apply to contributions made in taxable years begin-
ning 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. 
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SEC. 1204. EXTENSION OF MODIFICATION OF CHARITABLE 
DEDUCTION FOR CONTRIBUTIONS OF BOOK 
INVENTORY. 
(a) IN GENERAL.—Section 170(e)(3)(D)(iv) (relating 
to termination) is amended by striking ‘‘2005’’ and insert-
ing ‘‘2007’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after De-
cember 31, 2005. 
SEC. 1205. MODIFICATION OF TAX TREATMENT OF CERTAIN 
PAYMENTS TO CONTROLLING EXEMPT ORGA-
NIZATIONS. 
(a) IN GENERAL.—Paragraph (13) of section 512(b) 
(relating to special rules for certain amounts received from 
controlled entities) is amended by redesignating subpara-
graph (E) as subparagraph (F) and by inserting after sub-
paragraph (D) the following new subparagraph: 
‘‘(E) PARAGRAPH TO APPLY ONLY TO CER-
TAIN EXCESS PAYMENTS.— 
‘‘(i) IN GENERAL.—Subparagraph (A) 
shall apply only to the portion of a quali-
fying specified payment received or accrued 
by the controlling organization that ex-
ceeds the amount which would have been 
paid or accrued if such payment met the 
requirements prescribed under section 482. 
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‘‘(ii) ADDITION
TO
TAX
FOR
VALU-
ATION MISSTATEMENTS.—The tax imposed 
by this chapter on the controlling organiza-
tion 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. 
‘‘(iii) QUALIFYING
SPECIFIED
PAY-
MENT.—The term ‘qualifying specified 
payment’ means a specified payment which 
is made pursuant to— 
‘‘(I) a binding written contract in 
effect on the date of the enactment of 
this subparagraph, or 
‘‘(II) a contract which is a re-
newal, under substantially similar 
terms, of a contract described in sub-
clause (I). 
‘‘(iv) TERMINATION.—This subpara-
graph shall not apply to payments received 
or accrued after December 31, 2007.’’. 
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(b) REPORTING.— 
(1) IN GENERAL.—Section 6033 (relating to re-
turns by exempt organizations) is amended by redes-
ignating subsection (h) as subsection (i) and by in-
serting after subsection (g) the following new sub-
section: 
‘‘(h) CONTROLLING ORGANIZATIONS.—Each control-
ling organization (within the meaning of section 
512(b)(13)) which is subject to the requirements of sub-
section (a) shall include on the return required under sub-
section (a)— 
‘‘(1) any interest, annuities, royalties, or rents 
received from each controlled entity (within the 
meaning of section 512(b)(13)), 
‘‘(2) any loans made to each such controlled en-
tity, and 
‘‘(3) any transfers of funds between such con-
trolling organization and each such controlled enti-
ty.’’. 
(2) REPORT
TO
CONGRESS.—Not later than 
January 1, 2009, the Secretary of the Treasury 
shall submit to the Committee on Finance of the 
Senate and the Committee on Ways and Means of 
the House of Representatives a report on the effec-
tiveness of the Internal Revenue Service in admin-
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istering the amendments made by subsection (a) and 
on the extent to which payments by controlled enti-
ties (within the meaning of section 512(b)(13) of the 
Internal Revenue Code of 1986) to controlling orga-
nizations (within the meaning of section 512(b)(13) 
of such Code) meet the requirements under section 
482 of such Code. Such report shall include the re-
sults of any audit of any controlling organization or 
controlled entity and recommendations relating to 
the tax treatment of payments from controlled enti-
ties to controlling organizations. 
(c) EFFECTIVE DATE.— 
(1) SUBSECTION (a).—The amendments made 
by subsection (a) shall apply to payments received or 
accrued after December 31, 2005. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall apply to returns the due date 
(determined without regard to extensions) of which 
is after the date of the enactment of this Act. 
SEC. 1206. ENCOURAGEMENT OF CONTRIBUTIONS OF CAP-
ITAL GAIN REAL PROPERTY MADE FOR CON-
SERVATION PURPOSES. 
(a) IN GENERAL.— 
(1) INDIVIDUALS.—Paragraph (1) of section 
170(b) (relating to percentage limitations) is amend-
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ed by redesignating subparagraphs (E) and (F) as 
subparagraphs (F) and (G), respectively, and by in-
serting after subparagraph (D) the following new 
subparagraph: 
‘‘(E) CONTRIBUTIONS OF QUALIFIED CON-
SERVATION CONTRIBUTIONS.— 
‘‘(i) IN GENERAL.—Any qualified con-
servation contribution (as defined in sub-
section (h)(1)) shall be allowed to the ex-
tent 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 contribu-
tions 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), 
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contributions described in clause (i) shall 
not be treated as described in subpara-
graph (A), (B), (C), or (D) and such sub-
paragraphs shall apply without regard to 
such contributions. 
‘‘(iv) SPECIAL RULE FOR CONTRIBU-
TION OF PROPERTY USED IN AGRICULTURE 
OR LIVESTOCK PRODUCTION.— 
‘‘(I) IN GENERAL.—If the indi-
vidual is a qualified farmer or rancher 
for the taxable year for which the con-
tribution is made, clause (i) shall be 
applied by substituting ‘100 percent’ 
for ‘50 percent’. 
‘‘(II) EXCEPTION.—Subclause (I) 
shall not apply to any contribution of 
property made after the date of the 
enactment of this subparagraph which 
is used in agriculture or livestock pro-
duction (or available for such produc-
tion) unless such contribution is sub-
ject to a restriction that such property 
remain available for such production. 
This subparagraph shall be applied 
separately with respect to property to 
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which subclause (I) does not apply by 
reason of the preceding sentence prior 
to its application to property to which 
subclause (I) does apply. 
‘‘(v) DEFINITION.—For purposes of 
clause (iv), the term ‘qualified farmer or 
rancher’ means a taxpayer whose gross in-
come from the trade or business of farm-
ing 
(within 
the 
meaning 
of 
section 
2032A(e)(5)) is greater than 50 percent of 
the taxpayer’s gross income for the taxable 
year. 
‘‘(vi) TERMINATION.—This subpara-
graph shall not apply to any contribution 
made in taxable years beginning after De-
cember 31, 2007.’’. 
(2) CORPORATIONS.—Paragraph (2) of section 
170(b) is amended to read as follows: 
‘‘(2) CORPORATIONS.—In the case of a corpora-
tion— 
‘‘(A) IN GENERAL.—The total deductions 
under subsection (a) for any taxable year (other 
than for contributions to which subparagraph 
(B) applies) shall not exceed 10 percent of the 
taxpayer’s taxable income. 
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‘‘(B) QUALIFIED
CONSERVATION
CON-
TRIBUTIONS BY CERTAIN CORPORATE FARMERS 
AND RANCHERS.— 
‘‘(i) IN GENERAL.—Any qualified con-
servation contribution (as defined in sub-
section (h)(1))— 
‘‘(I) which is made by a corpora-
tion which, for the taxable year during 
which the contribution is made, is a 
qualified farmer or rancher (as de-
fined in paragraph (1)(E)(v)) and the 
stock of which is not readily tradable 
on an established securities market at 
any time during such year, and 
‘‘(II) which, in the case of con-
tributions made after the date of the 
enactment of this subparagraph, is a 
contribution of property which is used 
in agriculture or livestock production 
(or available for such production) and 
which is subject to a restriction that 
such property remain available for 
such production, 
shall be allowed to the extent the aggregate 
of such contributions does not exceed the 
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ccoleman on PROD1PC71 with BILLS
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excess of the taxpayer’s taxable income 
over the amount of charitable contributions 
allowable under subparagraph (A). 
‘‘(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)(2)) 
as a charitable contribution to which clause 
(i) applies in each of the 15 succeeding 
years in order of time. 
‘‘(iii) TERMINATION.—This subpara-
graph shall not apply to any contribution 
made in taxable years beginning after De-
cember 31, 2007. 
‘‘(C) TAXABLE INCOME.—For purposes of 
this paragraph, taxable income shall be com-
puted without regard to— 
‘‘(i) this section, 
‘‘(ii) part VIII (except section 248), 
‘‘(iii) any net operating loss carryback 
to the taxable year under section 172, 
‘‘(iv) section 199, and 
‘‘(v) any capital loss carryback to the 
taxable year under section 1212(a)(1).’’. 
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(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 170(d) is amended 
by striking ‘‘subsection (b)(2)’’ each place it appears 
and inserting ‘‘subsection (b)(2)(A)’’. 
(2) Section 545(b)(2) is amended by striking 
‘‘and (D)’’ and inserting ‘‘(D), and (E)’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made in taxable 
years beginning after December 31, 2005. 
SEC. 1207. EXCISE TAXES EXEMPTION FOR BLOOD COL-
LECTOR ORGANIZATIONS. 
(a) EXEMPTION FROM IMPOSITION
OF SPECIAL 
FUELS TAX.—Section 4041(g) (relating to other exemp-
tions) is amended by striking ‘‘and’’ at the end of para-
graph (3), by striking the period in paragraph (4) and 
inserting ‘‘; and’’, and by inserting after paragraph (4) 
the following new paragraph: 
‘‘(5) with respect to the sale of any liquid to a 
qualified blood collector organization (as defined in 
section 7701(a)(49)) for such organization’s exclu-
sive use in the collection, storage, or transportation 
of blood.’’. 
(b) EXEMPTION FROM MANUFACTURERS EXCISE 
TAX.— 
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(1) IN GENERAL.—Section 4221(a) (relating to 
certain tax-free sales) is amended by striking ‘‘or’’ 
at the end of paragraph (4), by adding ‘‘or’’ at the 
end of paragraph (5), and by inserting after para-
graph (5) the following new paragraph: 
‘‘(6) to a qualified blood collector organization 
(as defined in section 7701(a)(49)) for such organi-
zation’s exclusive use in the collection, storage, or 
transportation of blood,’’. 
(2) NO
EXEMPTION
WITH
RESPECT
TO
VAC-
CINES
AND
RECREATIONAL
EQUIPMENT.—Section 
4221(a) is amended by adding at the end the fol-
lowing new sentence: ‘‘In the case of taxes imposed 
by subchapter C or D, paragraph (6) shall not 
apply.’’. 
(3) CONFORMING AMENDMENTS.— 
(A) The second sentence of section 
4221(a) is amended by striking ‘‘Paragraphs 
(4) and (5)’’ and inserting ‘‘Paragraphs (4), 
(5), and (6)’’. 
(B) Section 6421(c) is amended by strik-
ing ‘‘or (5)’’ and inserting ‘‘(5), or (6)’’. 
(c) EXEMPTION
FROM
COMMUNICATION
EXCISE 
TAX.— 
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ccoleman on PROD1PC71 with BILLS
799 
(1) IN GENERAL.—Section 4253 (relating to ex-
emptions) is amended by redesignating subsection 
(k) as subsection (l) and inserting after subsection 
(j) the following new subsection: 
‘‘(k) EXEMPTION
FOR
QUALIFIED
BLOOD
COL-
LECTOR ORGANIZATIONS.—Under regulations provided by 
the Secretary, no tax shall be imposed under section 4251 
on any amount paid by a qualified blood collector organi-
zation (as defined in section 7701(a)(49)) for services or 
facilities furnished to such organization.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
4253(l), as redesignated by paragraph (1), is 
amended by striking ‘‘or (j)’’ and inserting ‘‘(j), or 
(k)’’. 
(d) EXEMPTION FROM TAX ON HEAVY VEHICLES.— 
Section 4483 is amended by redesignating subsection (h) 
as subsection (i) and by inserting after subsection (g) the 
following new subsection: 
‘‘(h) EXEMPTION FOR VEHICLES USED IN BLOOD 
COLLECTION.— 
‘‘(1) IN GENERAL.—No tax shall be imposed by 
section 4481 on the use of any qualified blood col-
lector vehicle by a qualified blood collector organiza-
tion. 
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‘‘(2) QUALIFIED
BLOOD
COLLECTOR
VEHI-
CLE.—For purposes of this subsection, the term 
‘qualified blood collector vehicle’ means a vehicle at 
least 80 percent of the use of which during the prior 
taxable period was by a qualified blood collector or-
ganization in the collection, storage, or transpor-
tation of blood. 
‘‘(3) SPECIAL
RULE
FOR
VEHICLES
FIRST 
PLACED IN SERVICE IN A TAXABLE PERIOD.—In the 
case of a vehicle first placed in service in a taxable 
period, a vehicle shall be treated as a qualified blood 
collector vehicle for such taxable period if such quali-
fied blood collector organization certifies to the Sec-
retary that the organization reasonably expects at 
least 80 percent of the use of such vehicle by the or-
ganization during such taxable period will be in the 
collection, storage, or transportation of blood. 
‘‘(4) QUALIFIED BLOOD COLLECTOR ORGANIZA-
TION.—The term ‘qualified blood collector organiza-
tion’ has the meaning given such term by section 
7701(a)(49).’’. 
(e) CREDIT OR REFUND FOR CERTAIN TAXES ON 
SALES AND SERVICES.— 
(1) DEEMED OVERPAYMENT.— 
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801 
(A) IN GENERAL.—Section 6416(b)(2) is 
amended by redesignating subparagraphs (E) 
and (F) as subparagraphs (F) and (G), respec-
tively, and by inserting after subparagraph (D) 
the following new subparagraph: 
‘‘(E) sold to a qualified blood collector or-
ganization (as defined in section 7701(a)(49)) 
for such organization’s exclusive use in the col-
lection, storage, or transportation of blood;’’. 
(B) NO CREDIT OR REFUND FOR VACCINES 
OR
RECREATIONAL
EQUIPMENT.—Section 
6416(b)(2) is amended by adding at the end the 
following new sentence: ‘‘In the case of taxes 
imposed by subchapter C or D of chapter 32, 
subparagraph (E) shall not apply.’’. 
(C) CONFORMING AMENDMENTS.—Section 
6416(b)(2) is amended— 
(i) by striking ‘‘Subparagraphs (C) 
and (D)’’ in the second sentence and in-
serting ‘‘Subparagraphs (C), (D), and 
(E)’’. 
(ii) by striking ‘‘(B), (C), and (D)’’ 
and inserting ‘‘(B), (C), (D), and (E)’’. 
(2) SALES OF TIRES.—Section 6416(b)(4)(B) is 
amended by striking ‘‘or’’ at the end of clause (i), 
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