SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tax Relief, Simplification, and Equity Act of 2003’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I—ENDING ABUSIVE TAX PRACTICES
Sec. 101. Individual expatriation to avoid tax.
Sec. 102. Suspension of tax-exempt status of terrorist organizations.
Sec. 103. Expressing the sense of the Congress that tax reform is needed to
address the issue of corporate expatriation.
TITLE II—RELIEF FOR FOREIGN SERVICE AND ASTRONAUTS
Sec. 201. Special rule for members of Foreign Service in determining exclusion
of gain from sale of principal residence.
Sec. 202. Tax relief and assistance for families of astronauts who lose their
lives on a space mission.
TITLE III—HEALTH PROVISIONS
Sec. 301. Vaccine tax to apply to hepatitis A vaccine.
Sec. 302. Expansion of human clinical trials qualifying for orphan drug credit.
TITLE IV—FOREST CONSERVATION ACTIVITIES
Sec. 401. Pilot project for forest conservation activities.
TITLE V—RELIEF AND EQUITY FOR SMALL BUSINESSES
Sec. 501. Simplification of excise tax imposed on bows and arrows.
Sec. 502. Capital gain treatment under section 631(b) to apply to outright
sales by landowners.
Sec. 503. Repeal of excise tax on fishing tackle boxes.
Sec. 504. Treatment under at-risk rules of publicly traded nonrecourse debt.
TITLE VI—EQUITY FOR FARMERS
Sec. 601. Special rules for livestock sold on account of weather-related condi-
tions.
Sec. 602. Income averaging for farmers not to increase alternative minimum
tax.
Sec. 603. Payment of dividends on stock of cooperatives without reducing pa-
tronage dividends.
TITLE VII—PROTECTION OF SOCIAL SECURITY
Sec. 701. Protection of social security.
TITLE I—ENDING ABUSIVE TAX
PRACTICES
SEC. 101. INDIVIDUAL EXPATRIATION TO AVOID TAX.
(a) EXPATRIATION TO AVOID TAX.—
(1) IN
GENERAL.—Subsection (a) of section
877 (relating to treatment of expatriates) is amend-
ed to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—
‘‘(1) IN GENERAL.—Every nonresident alien in-
dividual to whom this section applies and who, with-
in the 10-year period immediately preceding the
close of the taxable year, lost United States citizen-
ship shall be taxable for such taxable year in the
manner provided in subsection (b) if the tax imposed
pursuant to such subsection (after any reduction in
such tax under the last sentence of such subsection)
exceeds the tax which, without regard to this section,
is imposed pursuant to section 871.
‘‘(2) INDIVIDUALS
SUBJECT
TO
THIS
SEC-
TION.—This section shall apply to any individual
if—
‘‘(A) the average annual net income tax
(as defined in section 38(c)(1)) of such indi-
vidual for the period of 5 taxable years ending
before the date of the loss of United States citi-
zenship is greater than $122,000,
‘‘(B) the net worth of the individual as of
such date is $2,000,000 or more, or
‘‘(C) such individual fails to certify under
penalty of perjury that he has met the require-
ments of this title for the 5 preceding taxable
years or fails to submit such evidence of such
compliance as the Secretary may require.
In the case of the loss of United States citizenship
in any calendar year after 2003, such $122,000
amount shall be increased by an amount equal to
such dollar amount multiplied by the cost-of-living
adjustment determined under section 1(f)(3) for
such calendar year by substituting ‘2002’ for ‘1992’
in subparagraph (B) thereof. Any increase under the
preceding sentence shall be rounded to the nearest
multiple of $1,000.’’.
(2) REVISION
OF
EXCEPTIONS
FROM
ALTER-
NATIVE TAX.—Subsection (c) of section 877 (relat-
ing to tax avoidance not presumed in certain cases)
is amended to read as follows:
‘‘(c) EXCEPTIONS.—
‘‘(1) IN
GENERAL.—Subparagraphs (A) and
(B) of subsection (a)(2) shall not apply to an indi-
vidual described in paragraph (2) or (3).
‘‘(2) DUAL CITIZENS.—
‘‘(A) IN GENERAL.—An individual is de-
scribed in this paragraph if—
‘‘(i) the individual became at birth a
citizen of the United States and a citizen
of another country and continues to be a
citizen of such other country, and
‘‘(ii) the individual has had no sub-
stantial contacts with the United States.
‘‘(B) SUBSTANTIAL CONTACTS.—An indi-
vidual shall be treated as having no substantial
contacts with the United States only if the
individual—
‘‘(i) was never a resident of the
United States (as defined in section
7701(b)),
‘‘(ii) has never held a United States
passport, and
‘‘(iii) was not present in the United
States for more than 30 days during any
calendar year which is 1 of the 10 calendar
years preceding the individual’s loss of
United States citizenship.
‘‘(3) CERTAIN MINORS.—An individual is de-
scribed in this paragraph if—
‘‘(A) the individual became at birth a cit-
izen of the United States,
‘‘(B) neither parent of such individual was
a citizen of the United States at the time of
such birth,
‘‘(C) the individual’s loss of United States
citizenship occurs before such individual attains
age 18 1⁄2, and
‘‘(D) the individual was not present in the
United States for more than 30 days during
any calendar year which is 1 of the 10 calendar
years preceding the individual’s loss of United
States citizenship.’’.
(3) 
CONFORMING
AMENDMENT.—Section
2107(a) is amended to read as follows:
‘‘(a) TREATMENT OF EXPATRIATES.—A tax com-
puted in accordance with the table contained in section
2001 is hereby imposed on the transfer of the taxable es-
tate, determined as provided in section 2106, of every de-
cedent nonresident not a citizen of the United States if
the date of death occurs during a taxable year with respect
to which the decedent is subject to tax under section
877(b).’’.
(b) SPECIAL RULES FOR DETERMINING WHEN AN
INDIVIDUAL IS NO LONGER A UNITED STATES CITIZEN
OR LONG-TERM RESIDENT.—Section 7701 (relating to
definitions) is amended by redesignating subsection (n) as
subsection (o) and by inserting after subsection (m) the
following new subsection:
‘‘(n) SPECIAL RULES FOR DETERMINING WHEN AN
INDIVIDUAL IS NO LONGER A UNITED STATES CITIZEN
OR LONG-TERM RESIDENT.—An individual who would not
(but for this subsection) be treated as a citizen or resident
of the United States shall continue to be treated as a cit-
izen or resident of the United States until such
individual—
‘‘(1) gives notice of an expatriating act or ter-
mination of residency (with the requisite intent to
relinquish citizenship or terminate residency) to the
Secretary of State or the Secretary of Homeland Se-
curity, and
‘‘(2) provides a statement in accordance with
section 6039G.’’.
(c) PHYSICAL PRESENCE IN THE UNITED STATES
FOR MORE THAN 30 DAYS.—Section 877 (relating to ex-
patriation to avoid tax) is amended by adding at the end
the following new subsection:
‘‘(g) PHYSICAL PRESENCE.—This section shall not
apply to any individual for any taxable year during the
10-year period referred to in subsection (a) in which such
individual is present in the United States for more than
30 days in the calendar year ending in such taxable year,
and such individual shall be treated for purposes of this
title as a citizen or resident of the United States for such
taxable year.’’.
(d) TRANSFERS SUBJECT TO GIFT TAX.—Subsection
(a) of section 2501 (relating to taxable transfers) is
amended by adding at the end the following:
‘‘(6) TRANSFERS OF CERTAIN STOCK.—
‘‘(A) IN
GENERAL.—Paragraph (3) shall
not apply to the transfer of stock described in
subparagraph (B) by any individual to whom
section 877(b) applies, and section 2511(a)
shall be applied without regard to whether such
stock is property which is situated within the
United States.
‘‘(B) VALUATION.—For purposes of sub-
paragraph (A), the value of stock shall be deter-
mined as provided in section 2103, except
that—
‘‘(i) if the donor owned (within the
meaning of section 958(a)) at the time of
such transfer 10 percent or more of the
total combined voting power of all classes
of stock entitled to vote of a foreign cor-
poration, and
‘‘(ii) if such donor owned (within the
meaning of section 958(a)), or is consid-
ered to have owned (by applying the own-
ership rules of section 958(b)), at the time
of such transfer, more than 50 percent
of—
‘‘(I) the total combined voting
power of all classes of stock entitled
to vote of such corporation, or
‘‘(II) the total value of the stock
of such corporation,then that propor-
tion of the fair market value of the
stock of such foreign corporation
owned (within the meaning of section
958(a)) by such donor at the time of
such transfer, which the fair market
value of any assets owned by such for-
eign corporation and situated in the
United States, at the time of such
transfer, bears to the total fair mar-
ket value of all assets owned by such
foreign corporation at the time of
such transfer, shall be included in the
value of such property.
For purposes of the preceding sentence, a donor
shall be treated as owning stock of a foreign
corporation at the time of such transfer if, at
such time, by trust or otherwise, within the
meaning of sections 2035 to 2038, inclusive, he
owned such stock.’’.
(e) ENHANCED INFORMATION REPORTING FROM IN-
DIVIDUALS LOSING UNITED STATES CITIZENSHIP.—
(1) IN
GENERAL.—Subsection (a) of section
6039G is amended to read as follows:
‘‘(a) IN GENERAL.—Notwithstanding any other pro-
vision of law, any individual to whom section 877(b) ap-
plies for any taxable year shall provide a statement for
such taxable year which includes the information described
in subsection (b).’’.
(2) INFORMATION
TO
BE
PROVIDED.—Sub-
section (b) of section 6039G is amended to read as
follows:
‘‘(b) INFORMATION TO BE PROVIDED.—Information
required under subsection (a) shall include—
‘‘(1) the taxpayer’s TIN,
‘‘(2) the mailing address of such individual’s
principal foreign residence,
‘‘(3) the foreign country, in which such indi-
vidual is residing,
‘‘(4) the foreign country of which such indi-
vidual is a citizen,
‘‘(5) information detailing the assets and liabil-
ities of such individual,
‘‘(6) the number of days that the individual was
present in the United States during the taxable year,
and
‘‘(7) such other information as the Secretary
may prescribe.’’.
(3) INCREASE IN PENALTY.—Subsection (d) of
section 6039G is amended to read as follows:
‘‘(d) PENALTY.—If—
‘‘(1) an individual is required to file a state-
ment under subsection (a) for any taxable year, and
‘‘(2) fails to file such a statement with the Sec-
retary on or before the date such statement is re-
quired to be filed or fails to include all the informa-
tion required to be shown on the statement or in-
cludes incorrect information,
such individual shall pay a penalty of $5,000 unless it is
shown that such failure is due to reasonable cause and
not to willful neglect.’’.
(4) 
CONFORMING
AMENDMENT.—Section
6039G is amended by striking subsections (c), (f),
and (g) and by redesignating subsections (d) and (e)
as subsection (c) and (d), respectively.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to individuals who expatriate after
February 27, 2003.
SEC. 102. 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
identified—
‘‘(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
determination 
described 
in 
subparagraph
(A)(ii).
‘‘(7) NOTICE OF SUSPENSIONS.—If the tax ex-
emption of any organization is suspended under this
subsection, the Internal Revenue Service shall up-
date the listings of tax-exempt organizations and
shall publish appropriate notice to taxpayers of such
suspension and of the fact that contributions to such
organization are not deductible during the period of
such suspension.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to designations made before, on,
or after the date of the enactment of this Act.
SEC. 103. EXPRESSING THE SENSE OF THE CONGRESS THAT
TAX REFORM IS NEEDED TO ADDRESS THE
ISSUE OF CORPORATE EXPATRIATION.
(a) FINDINGS.—The Congress finds that—
(1) the tax laws of the United States are overly
complex;
(2) the tax laws of the United States are among
the most burdensome and uncompetitive in the
world;
(3) the tax laws of the United States make it
difficult for domestically-owned United States com-
panies to compete abroad and in the United States;
(4) a domestically-owned corporation is dis-
advantaged compared to a United States subsidiary
of a foreign-owned corporation; and
(5) international competitiveness is forcing
many United States corporations to make a choice
they do not want to make–go out of business, sell
the business to a foreign competitor, or become a
subsidiary of a foreign corporation (i.e., engage in
an inversion transaction).
(b) SENSE OF CONGRESS.—It is the sense of Con-
gress that passage of legislation to fix the underlying prob-
lems with our tax laws is essential and should occur as
soon as possible, so United States corporations will not
face the current pressures to engage in inversion trans-
actions.
TITLE II—RELIEF FOR FOREIGN
SERVICE AND ASTRONAUTS
SEC. 201. SPECIAL RULE FOR MEMBERS OF FOREIGN SERV-
ICE IN DETERMINING EXCLUSION OF GAIN
FROM SALE OF PRINCIPAL RESIDENCE.
(a) IN GENERAL.—Subsection (d) of section 121 (re-
lating to exclusion of gain from sale of principal residence)
is amended by adding at the end the following new para-
graph:
‘‘(10) MEMBERS OF FOREIGN SERVICE.—
‘‘(A) IN GENERAL.—At the election of an
individual with respect to a property, the run-
ning of the 5-year period referred to in sub-
sections (a) and (c)(1)(B) and paragraph (7) of
this subsection with respect to such property
shall be suspended during any period that such
individual or such individual’s spouse is serving
on qualified official extended duty as a member
of the Foreign Service.
‘‘(B) MAXIMUM PERIOD OF SUSPENSION.—
Such 5-year period shall not be extended more
than 5 years by reason of subparagraph (A).
‘‘(C) QUALIFIED
OFFICIAL
EXTENDED
DUTY.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘quali-
fied official extended duty’ means any ex-
tended duty while serving at a duty station
which is at least 150 miles from such prop-
erty or while residing under Government
orders in Government quarters.
‘‘(ii) FOREIGN
SERVICE.—The term
‘member of the Foreign Service’ has the
meaning given the term ‘member of the
Service’ by paragraph (1), (2), (3), (4), or
(5) of section 103 of the Foreign Service
Act of 1980, as in effect on the date of the
enactment of this paragraph.
‘‘(iii) EXTENDED
DUTY.—The term
‘extended duty’ means any period of active
duty pursuant to a call or order to such
duty for a period in excess of 180 days or
for an indefinite period.
‘‘(D) SPECIAL RULES RELATING TO ELEC-
TION.—
‘‘(i) ELECTION LIMITED TO 1 PROP-
ERTY AT A TIME.—An election under sub-
paragraph (A) with respect to any property
may not be made if such an election is in
effect with respect to any other property.
‘‘(ii) REVOCATION OF ELECTION.—An
election under subparagraph (A) may be
revoked at any time.’’.
(b) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendment made
by this section shall take effect as if included in the
amendments made by section 312 of the Taxpayer
Relief Act of 1997.
(2) WAIVER
OF
LIMITATIONS.—If refund or
credit of any overpayment of tax resulting from the
amendment made by this section is prevented at any
time before the close of the 1-year period beginning
on the date of the enactment of this Act by the oper-
ation of any law or rule of law (including res judi-
cata), such refund or credit may nevertheless be
made or allowed if claim therefor is filed before the
close of such period.
SEC. 202. TAX RELIEF AND ASSISTANCE FOR FAMILIES OF
ASTRONAUTS WHO LOSE THEIR LIVES ON A
SPACE MISSION.
(a) INCOME TAX RELIEF.—
(1) IN
GENERAL.—Subsection (d) of section
692 (relating to income taxes of members of Armed
Forces and victims of certain terrorist attacks on
death) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(5) RELIEF
WITH
RESPECT
TO
ASTRO-
NAUTS.—The provisions of this subsection shall
apply to any astronaut whose death occurs while on
a space mission, except that paragraph (3)(B) shall
be applied by using the date of the death of the as-
tronaut rather than September 11, 2001.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 5(b)(1) is amended by insert-
ing ‘‘, astronauts,’’ after ‘‘Forces’’.
(B) Section 6013(f)(2)(B) is amended by
inserting ‘‘, astronauts,’’ after ‘‘Forces’’.
(3) CLERICAL AMENDMENTS.—
(A) The heading of section 692 is amended
by 
inserting 
‘‘, 
ASTRONAUTS,’’ 
after
‘‘FORCES’’.
(B) The item relating to section 692 in the
table of sections for part II of subchapter J of
chapter 1 is amended by inserting ‘‘, astro-
nauts,’’ after ‘‘Forces’’.
(4) EFFECTIVE DATE.—The amendments made
by this subsection shall apply with respect to any as-
tronaut whose death occurs after December 31,
2002.
(b) DEATH BENEFIT RELIEF.—
(1) IN GENERAL.—Subsection (i) of section 101
(relating to certain death benefits) is amended by
adding at the end the following new paragraph:
‘‘(4) RELIEF
WITH
RESPECT
TO
ASTRO-
NAUTS.—The provisions of this subsection shall
apply to any astronaut whose death occurs while on
a space mission.’’.
(2) CLERICAL AMENDMENT.—The heading for
subsection (i) of section 101 is amended by inserting
‘‘OR ASTRONAUTS’’ after ‘‘VICTIMS’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to amounts paid after
December 31, 2002, with respect to deaths occurring
after such date.
(c) ESTATE TAX RELIEF.—
(1) IN
GENERAL.—Subsection (b) of section
2201 (defining qualified decedent) is amended by
striking ‘‘and’’ at the end of paragraph (1)(B), by
striking the period at the end of paragraph (2) and
inserting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph:
‘‘(3) any astronaut whose death occurs while on
a space mission.’’.
(2) CLERICAL AMENDMENTS.—
(A) The heading of section 2201 is amend-
ed by inserting ‘‘, DEATHS
OF
ASTRO-
NAUTS,’’ after ‘‘FORCES’’.
(B) The item relating to section 2201 in
the table of sections for subchapter C of chap-
ter 11 is amended by inserting ‘‘, deaths of as-
tronauts,’’ after ‘‘Forces’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to estates of decedents
dying after December 31, 2002.
TITLE III—HEALTH PROVISIONS
SEC. 301. VACCINE TAX TO APPLY TO HEPATITIS A VAC-
CINE.
(a) IN GENERAL.—Paragraph (1) of section 4132(a)
(defining taxable vaccine) is amended by redesignating
subparagraphs (I), (J), (K), and (L) as subparagraphs
(J), (K), (L), and (M), respectively, and by inserting after
subparagraph (H) the following new subparagraph:
‘‘(I) Any vaccine against hepatitis A.’’
(b) EFFECTIVE DATE.—
(1) SALES, ETC.—The amendments made by
subsection (a) shall apply to sales and uses on or
after the first day of the first month which begins
more than 4 weeks after the date of the enactment
of this Act.
(2) DELIVERIES.—For purposes of paragraph
(1) and section 4131 of the Internal Revenue Code
of 1986, in the case of sales on or before the effec-
tive date described in such paragraph for which de-
livery is made after such date, the delivery date shall
be considered the sale date.
SEC. 302. EXPANSION OF HUMAN CLINICAL TRIALS QUALI-
FYING FOR ORPHAN DRUG CREDIT.
(a) IN GENERAL.—Paragraph (2) of section 45C(b)
(relating to qualified clinical testing expenses) is amended
by adding at the end the following new subparagraph:
‘‘(C) TREATMENT OF CERTAIN EXPENSES
INCURRED
BEFORE
DESIGNATION.—For pur-
poses of subparagraph (A)(ii)(I), if a drug is
designated under section 526 of the Federal
Food, Drug, and Cosmetic Act not later than
the due date (including extensions) for filing
the return of tax under this subtitle for the tax-
able year in which the application for such des-
ignation of such drug was filed, such drug shall
be treated as having been designated on the
date that such application was filed. The pre-
ceding sentence shall not apply with respect to
any expense incurred after December 31,
2010.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to expenses incurred after the
date of the enactment of this Act.
TITLE IV—FOREST
CONSERVATION ACTIVITIES
SEC. 401. PILOT PROJECT FOR FOREST CONSERVATION AC-
TIVITIES.
(a) TAX-EXEMPT BOND FINANCING.—
(1) IN GENERAL.—For purposes of the Internal
Revenue Code of 1986, any qualified forest con-
servation bond shall be treated as an exempt facility
bond under section 142 of such Code.
(2) 
QUALIFIED
FOREST
CONSERVATION
BOND.—For purposes of this section, the term
‘‘qualified forest conservation bond’’ means any bond
issued as part of an issue if—
(A) 95 percent or more of the net proceeds
(as defined in section 150(a)(3) of such Code)
of such issue are to be used for qualified project
costs,
(B) such bond is an obligation of the State
of Washington or any political subdivision
thereof and is issued for the Evergreen Forest
Trust, and
(C) such bond is issued before October 1,
2004.
(3) 
LIMITATION
ON
AGGREGATE
AMOUNT
ISSUED.—The maximum aggregate face amount of
bonds which may be issued under this section shall
not exceed $250,000,000.
(4) QUALIFIED PROJECT COSTS.—For purposes
of this subsection, the term ‘‘qualified project costs’’
means the sum of—
(A) the cost of acquisition by the Ever-
green Forest Trust from an unrelated person of
forests and forest land—
(i) which are located in the State of
Washington, and
(ii) which at the time of acquisition or
immediately thereafter are subject to a
conservation restriction described in sub-
section (c)(2),
(B) capitalized interest on the qualified
forest conservation bonds for the 3-year period
beginning on the date of issuance of such
bonds, and
(C) credit enhancement fees which con-
stitute qualified guarantee fees (within the
meaning of section 148 of such Code).
(5) SPECIAL RULES.—In applying the Internal
Revenue Code of 1986 to any qualified forest con-
servation bond, the following modifications shall
apply:
(A) Section 146 of such Code (relating to
volume cap) shall not apply.
(B) For purposes of section 147(b) of such
Code (relating to maturity may not exceed 120
percent of economic life), the land and standing
timber acquired with proceeds of qualified for-
est conservation bonds shall have an economic
life of 35 years.
(C) Subsections (c) and (d) of section 147
of such Code (relating to limitations on acquisi-
tion of land and existing property) shall not
apply.
(D) Section 57(a)(5) of such Code (relat-
ing to tax-exempt interest) shall not apply to
interest on qualified forest conservation bonds.
(6) TREATMENT
OF
CURRENT
REFUNDING
BONDS.—Paragraphs (2)(C) and (3) shall not apply
to any bond (or series of bonds) issued to refund a
qualified forest conservation bond issued before Oc-
tober 1, 2004, if—
(A) the average maturity date of the issue
of which the refunding bond is a part is not
later than the average maturity date of the
bonds to be refunded by such issue,
(B) the amount of the refunding bond does
not exceed the outstanding amount of the re-
funded bond, and
(C) the net proceeds of the refunding bond
are used to redeem the refunded bond not later
than 90 days after the date of the issuance of
the refunding bond.
For purposes of subparagraph (A), average maturity
shall be determined in accordance with section
147(b)(2)(A) of such Code.
(7) EFFECTIVE
DATE.—This subsection shall
apply to obligations issued after the date of the en-
actment of this Act.
(b) ITEMS FROM QUALIFIED HARVESTING ACTIVI-
TIES NOT SUBJECT TO TAX OR TAKEN INTO ACCOUNT.—
(1) IN GENERAL.—Income, gains, deductions,
losses, or credits from a qualified harvesting activity
conducted by the Evergreen Forest Trust shall not
be subject to tax or taken into account under sub-
title A of the Internal Revenue Code of 1986.
(2) QUALIFIED
HARVESTING
ACTIVITY.—For
purposes of paragraph (1)—
(A) IN
GENERAL.—The term ‘‘qualified
harvesting activity’’ means the sale, lease, or
harvesting, of standing timber—
(i) on land owned by the Evergreen
Forest Trust which was acquired with pro-
ceeds of qualified forest conservation
bonds, and
(ii) pursuant to a qualified conserva-
tion plan adopted by the Evergreen Forest
Trust.
(B) EXCEPTIONS.—
(i) CESSATION AS QUALIFIED ORGANI-
ZATION.—The term ‘‘qualified harvesting
activity’’ shall not include any sale, lease,
or harvesting during any period that the
Evergreen Forest Trust is not a qualified
organization.
(ii) EXCEEDING
LIMITS
ON
HAR-
VESTING.—The term ‘‘qualified harvesting
activity’’ shall not include any sale, lease,
or harvesting of standing timber on land
acquired with proceeds of qualified forest
conservation bonds to the extent that—
(I) the average annual area of
timber harvested from such land ex-
ceeds 2.5 percent of the total area of
such land, or
(II) the quantity of timber re-
moved from such land exceeds the
quantity which can be removed from
such land annually in perpetuity on a
sustained-yield basis with respect to
such land.
The limitations under subclauses (I) and
(II) shall not apply to salvage or sanitation
harvesting of timber stands which are sub-
stantially damaged by fire, windthrow, or
other catastrophe, or which are in immi-
nent danger from insect or disease attack.
(3) TERMINATION.—This subsection shall not
apply to any qualified harvesting activity occurring
after the date on which there is no outstanding
qualified forest conservation bond or any such bond
ceases to be a tax-exempt bond.
(4) PARTIAL RECAPTURE OF BENEFITS IF HAR-
VESTING LIMIT EXCEEDED.—If, as of the date that
this subsection ceases to apply under paragraph (3),
the average annual area of timber harvested from
the land exceeds the requirement of paragraph
(2)(B)(ii)(I), the tax imposed by chapter 1 of the In-
ternal Revenue Code of 1986 shall be increased,
under rules prescribed by the Secretary, by the sum
of the tax benefit attributable to such excess and in-
terest at the underpayment rate under section 6621
for the period of the underpayment.
(c) DEFINITIONS.—For purposes of this section—
(1) QUALIFIED
CONSERVATION
PLAN.—The
term ‘‘qualified conservation plan’’ means a multiple
land use program or plan which—
(A) is designed and administered primarily
for the purposes of protecting and enhancing
wildlife and fish, timber, scenic attributes,
recreation, and soil and water quality of the
forest and forest land,
(B) mandates that conservation of forest
and forest land is the single-most significant
use of the forest and forest land,
(C) requires that timber harvesting be con-
sistent with—
(i) restoring and maintaining ref-
erence conditions for the Westside Douglas
Fir forest type,
(ii) restoring and maintaining a rep-
resentative sample of young, mid, and late
successional forest age classes,
(iii) maintaining or restoring the re-
sources’ ecological health for purposes of
preventing damage from fire, insect, or dis-
ease,
(iv) maintaining or enhancing wildlife
or fish habitat,
(v) enhancing research opportunities
in sustainable renewable resource uses, or
(vi) preserving or protecting open
space.
(2) CONSERVATION
RESTRICTION.—The con-
servation restriction described in this paragraph is a
restriction which—
(A) is granted in perpetuity to an unre-
lated person which is described in section
170(h)(3) of such Code and which, in the case
of a nongovernmental unit, is organized and op-
erated for conservation purposes,
(B) meets the requirements of clause (ii)
or (iii)(II) of section 170(h)(4)(A) of such
Code,
(C) obligates the Evergreen Forest Trust
to pay the costs incurred by the holder of the
conservation restriction in monitoring compli-
ance with such restriction, and