212
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 3030. DEFINITION OF INSURANCE COMPANY FOR SEC-
TION 831. 
(a) IN GENERAL.—Section 831 is amended by redes-
ignating subsection (c) as subsection (d) and by inserting 
after subsection (b) the following new subsection: 
‘‘(c) INSURANCE COMPANY DEFINED.—For purposes 
of this section, the term ‘insurance company’ has the 
meaning given to such term by section 816(a)).’’
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 3031. QUALIFIED TAX COLLECTION CONTRACTS. 
(a) CONTRACT REQUIREMENTS.—
(1) IN GENERAL.—Subchapter A of chapter 64 
(relating to collection) is amended by adding at the 
end the following new section: 
‘‘SEC. 6306. QUALIFIED TAX COLLECTION CONTRACTS. 
‘‘(a) IN GENERAL.—Nothing in any provision of law 
shall be construed to prevent the Secretary from entering 
into a qualified tax collection contract.
213
‘‘(b) QUALIFIED TAX COLLECTION CONTRACT.—For 
purposes of this section, the term ‘qualified tax collection 
contract’ means any contract which—
‘‘(1) is for the services of any person (other 
than an officer or employee of the Treasury Depart-
ment) to locate and contact any taxpayer specified 
by the Secretary, to request payment from such tax-
payer of an amount of Federal tax specified by the 
Secretary, and to obtain financial information speci-
fied by the Secretary with respect to such taxpayer, 
‘‘(2) prohibits each person providing such serv-
ices under such contract from committing any act or 
omission which employees of the Internal Revenue 
Service are prohibited from committing in the per-
formance of similar services, 
‘‘(3) prohibits subcontractors from—
‘‘(A) having contacts with taxpayers, 
‘‘(B) providing quality assurance services, 
and 
‘‘(C) composing debt collection notices, and 
‘‘(4) permits subcontracts to perform other 
services only with the approval of the Secretary. 
‘‘(c) FEES.—The Secretary may retain and use an 
amount not in excess of 25 percent of the amount collected 
under any qualified tax collection contract for the costs
214
of services performed under such contract. The Secretary 
shall keep adequate records regarding amounts so retained 
and used. The amount credited as paid by any taxpayer 
shall be determined without regard to this subsection. 
‘‘(d) NO FEDERAL LIABILITY.—The United States 
shall not be liable for any act or omission of any person 
performing services under a qualified tax collection con-
tract. 
‘‘(e) APPLICATION
OF FAIR DEBT COLLECTION 
PRACTICES ACT.—The provisions of the Fair Debt Collec-
tion Practices Act (15 U.S.C. 1692 et seq.) shall apply 
to any qualified tax collection contract, except to the ex-
tent superseded by section 6304, section 7602(c), or by 
any other provision of this title. 
‘‘(f) CROSS REFERENCES.—
‘‘(1) For damages for certain unauthorized col-
lection actions by persons performing services under 
a qualified tax collection contract, see section 
7433A. 
‘‘(2) For application of Taxpayer Assistance 
Orders to persons performing services under a quali-
fied tax collection contract, see section 7811(a)(4).’’. 
(2) CONFORMING AMENDMENTS.—
(A) Section 7809(a) is amended by insert-
ing ‘‘6306,’’ before ‘‘7651’’.
215
(B) The table of sections for subchapter A 
of chapter 64 is amended by adding at the end 
the following new item:
‘‘Sec. 6306. Qualified Tax Collection Contracts.’’.
(b) CIVIL DAMAGES FOR CERTAIN UNAUTHORIZED 
COLLECTION ACTIONS BY PERSONS PERFORMING SERV-
ICES
UNDER
QUALIFIED
TAX
COLLECTION
CON-
TRACTS.—
(1) IN GENERAL.—Subchapter B of chapter 76 
(relating to proceedings by taxpayers and third par-
ties) is amended by inserting after section 7433 the 
following new section: 
‘‘SEC. 7433A. CIVIL DAMAGES FOR CERTAIN UNAUTHOR-
IZED COLLECTION ACTIONS BY PERSONS 
PERFORMING SERVICES UNDER QUALIFIED 
TAX COLLECTION CONTRACTS. 
‘‘(a) IN GENERAL.—Subject to the modifications pro-
vided by subsection (b), section 7433 shall apply to the 
acts and omissions of any person performing services 
under a qualified tax collection contract (as defined in sec-
tion 6306(b)) to the same extent and in the same manner 
as if such person were an employee of the Internal Rev-
enue Service. 
‘‘(b) MODIFICATIONS.—For purposes of subsection 
(a)—
216
‘‘(1) Any civil action brought under section 
7433 by reason of this section shall be brought 
against the person who entered into the qualified tax 
collection contract with the Secretary and shall not 
be brought against the United States. 
‘‘(2) Such person and not the United States 
shall be liable for any damages and costs determined 
in such civil action. 
‘‘(3) Such civil action shall not be an exclusive 
remedy with respect to such person. 
‘‘(4) Subsections (c), (d)(1), and (e) of section 
7433 shall not apply.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subchapter B of chapter 76 is amended by 
inserting after the item relating to section 7433 the 
following new item:
‘‘Sec. 7433A. Civil damages for certain unauthorized collection ac-
tions by persons performing services under a quali-
fied tax collection contract.’’.
(c) APPLICATION
OF TAXPAYER ASSISTANCE OR-
DERS
TO PERSONS PERFORMING SERVICES UNDER
A 
QUALIFIED TAX COLLECTION CONTRACT.—Section 7811 
(relating to taxpayer assistance orders) is amended by 
adding at the end the following new subsection: 
‘‘(g) APPLICATION TO PERSONS PERFORMING SERV-
ICES UNDER
A QUALIFIED TAX COLLECTION CON-
TRACT.—Any order issued or action taken by the National
217
Taxpayer Advocate pursuant to this section shall apply to 
persons performing services under a qualified tax collec-
tion contract (as defined in section 6306(b)) to the same 
extent and in the same manner as such order or action 
applies to the Secretary.’’. 
(d) INELIGIBILITY OF INDIVIDUALS WHO COMMIT 
MISCONDUCT TO PERFORM UNDER CONTRACT.—Section 
1203 of the Internal Revenue Service Restructuring Act 
of 1998 (relating to termination of employment for mis-
conduct) is amended by adding at the end the following 
new subsection: 
‘‘(e) INDIVIDUALS PERFORMING SERVICES UNDER A 
QUALIFIED TAX COLLECTION CONTRACT.— An individual 
shall cease to be permitted to perform any services under 
any qualified tax collection contract (as defined in section 
6306(b) of the Internal Revenue Code of 1986) if there 
is a final determination by the Secretary of the Treasury 
under such contract that such individual committed any 
act or omission described under subsection (b) in connec-
tion with the performance of such services.’’. 
(e) EFFECTIVE DATE.—The amendments made to 
this section shall take effect on the date of the enactment 
of this Act.
218
TITLE 
IV—TRADE 
ENHANCE-
MENT AND COMPLIANCE PRO-
VISIONS 
SEC. 
4001. 
REPEAL 
OF 
EXCLUSION 
FOR 
EXTRATERRITORIAL INCOME. 
(a) IN GENERAL.—Section 114 is hereby repealed. 
(b) CONFORMING AMENDMENTS.—
(1) Subpart E of part III of subchapter N of 
chapter 1 (relating to qualifying foreign trade in-
come) is hereby repealed. 
(2) The table of subparts for such part III is 
amended by striking the item relating to subpart E. 
(3) The table of sections for part III of sub-
chapter B of chapter 1 is amended by striking the 
item relating to section 114. 
(c) EFFECTIVE DATE.—Except as provided in sub-
section (d), the amendments made by this section shall 
apply to transactions after December 31, 2003. 
(d) TRANSITIONAL RULE FOR 2004 AND 2005.—
(1) IN GENERAL.—In the case of transactions 
during 2004 and 2005, the amount includible in 
gross income by reason of the amendments made by 
this section shall not exceed the applicable percent-
age of the amount which would have been so in-
cluded but for this subsection.
219
(2) APPLICABLE PERCENTAGE.—For purposes 
of paragraph (1), the applicable percentage shall be 
as follows: 
(A) For 2004, the applicable percentage 
shall be 35 percent. 
(B) For 2005, the applicable percentage 
shall be 65 percent. 
(e) REVOCATION OF ELECTION TO BE TREATED AS 
DOMESTIC CORPORATION.—If, during the 1-year period 
beginning on the date of the enactment of this Act, a cor-
poration for which an election is in effect under section 
943(e) of the Internal Revenue Code of 1986 revokes such 
election, no gain or loss shall be recognized with respect 
to property treated as transferred under clause (ii) of sec-
tion 943(e)(4)(B) of such Code to the extent such prop-
erty—
(1) was treated as transferred under clause (i) 
thereof, or 
(2) was acquired during a taxable year to which 
such election applies and before May 1, 2003, in the 
ordinary course of its trade or business. 
The Secretary of the Treasury (or such Secretary’s dele-
gate) may prescribe such regulations as may be necessary 
to prevent the abuse of the purposes of this subsection.
220
SEC. 4002. COBRA FEES. 
(a) USE OF MERCHANDISE PROCESSING FEE.—Sec-
tion 13031(f) of the Consolidated Omnibus Budget Rec-
onciliation Act of 1985 (19 U.S.C. 58c(f)) is amended—
(1) in paragraph (1), by aligning subparagraph 
(B) with subparagraph (A); and 
(2) in paragraph (2), by striking ‘‘commercial 
operations’’ and all that follows through ‘‘proc-
essing’’ and inserting ‘‘customs revenue functions as 
defined in section 415 of the Homeland Security Act 
of 2002 (other than functions performde by the Of-
fice of International Affairs referred to in section 
415(8) of that Act), and for automation (including 
the Automation Commercial Environment computer 
system), and for no other purpose. To the extent 
that funds in the Customs User Fee Account are in-
sufficient to pay the costs of such customs revenue 
functions, customs duties in an amount equal to the 
amount of such insufficiency shall be available, to 
the extent provided for in appropriations Acts, to 
pay the costs of such customs revenue functions in 
the amount of such insufficiency, and shall be avail-
able for no other purpose. The provisions of the first 
and second sentences of this paragraph specifying 
the purposes for which amounts in the Customs 
User Fee Account may be made available shall not
221
be superseded except by a provision of law which 
specifically modifies or supersedes such provisions.’’. 
(b) REIMBURSEMENT
OF APPROPRIATIONS FROM 
COBRA FEES.—Section 13031(f)(3) of the Consolidated 
Omnibus Budget Reconciliation Act of 1985 (19 U.S.C. 
58c(f)(3)) is amended by adding at the end the following: 
‘‘(E) Nothing in this paragraph shall be construed 
to preclude the use of appropriated funds, from sources 
other than the fees collected under subsection (a), to pay 
the costs set forth in clauses (i), (ii), and (iii) of subpara-
graph (A).’’. 
(c) SENSE OF CONGRESS; EFFECTIVE PERIOD FOR 
COLLECTING FEES; STANDARD FOR SETTING FEES.—
(1) SENSE OF CONGRESS.—The Congress finds 
that—
(A) the fees set forth in paragraphs (1) 
through (8) of subsection (a) of section 13031 
of the Consolidated Omnibus Budget Reconcili-
ation Act of 1985 have been reasonably related 
to the costs of providing customs services in 
connection with the activities or items for which 
the fees have been charged under such para-
graphs; and 
(B) the fees collected under such para-
graphs have not exceeded, in the aggregate, the
222
amounts paid for the costs described in sub-
section (f)(3)(A) incurred in providing customs 
services in connection with the activities or 
items for which the fees were charged under 
such paragraphs. 
(2) EFFECTIVE PERIOD; STANDARD FOR SET-
TING
FEES.—Section 13031(j)(3) of the Consoli-
dated Omnibus Budget Reconciliation Act of 1985 is 
amended to read as follows: 
‘‘(3)(A) Fees may not be charged under paragraphs 
(9) and (10) of subsection (a) after September 30, 2013. 
‘‘(B)(i) Subject to clause (ii), Fees may not be 
charged under paragraphs (1) through (8) of subsection 
(a) after September 30, 2006. 
‘‘(ii) In fiscal year 2006 and in each succeeding fiscal 
year for which fees under paragraphs (1) through (8) of 
subsection (a) are authorized—
‘‘(I) the Secretary of the Treasury shall charge 
fees under each such paragraph in amounts that are 
reasonably related to the costs of providing customs 
services in connection with the activity or item for 
which the fee is charged under such paragraph; 
‘‘(II) the amount of fees collected under such 
paragraphs may not exceed, in the aggregate, the 
amounts paid in that fiscal year for the costs de-
223
scribed in subsection (f)(3)(A) incurred in providing 
customs services in connection with the activity or 
item for which the fees are charged under such 
paragraphs; 
‘‘(III) a fee may not be collected under any 
such paragraph except to the extent such fee will be 
expended to pay the costs described in subsection 
(f)(3)(A) incurred in providing customs services in 
connection with the activity or item for which the fee 
is charged under such paragraph; and 
‘‘(IV) any fee collected under any such para-
graph shall be available for expenditure only to pay 
the costs described in subsection (f)(3)(A) incurred 
in providing customs services in connection with the 
activity or item for which the fee is charged under 
such paragraph.’’. 
(d) CLERICAL AMENDMENTS.—Section 13031 of the 
Consolidated Omnibus Budget Reconciliation Act of 1985 
is amended—
(1) in subsection (a)(5)(B), by striking ‘‘$1.75’’ 
and inserting ‘‘$1.75.’’; 
(2) in subsection (b)—
(A) in paragraph (1)(A), by aligning clause 
(iii) with clause (ii);
224
(B) in paragraph (7), by striking ‘‘para-
graphs’’ and inserting ‘‘paragraph’’; and 
(C) in paragraph (9), by aligning subpara-
graph (B) with subparagraph (A); and 
(3) in subsection (e)(2), by aligning subpara-
graph (B) with subparagraph (A). 
(e) STUDY OF ALL FEES COLLECTED BY DEPART-
MENT OF HOMELAND SECURITY.—The Secretary of the 
Treasury shall conduct a study of all the fees collected 
by the Department of Homeland Security, and shall sub-
mit to the Congress, not later than September 30, 2005, 
a report containing the recommendations of the Secretary 
on—
(1) what fees should be eliminated; 
(2) what the rate of fees retained should be; 
and 
(3) any other recommendations with respect to 
the fees that the Secretary considers appropriate.
Æ