I 
108TH CONGRESS 
2D SESSION 
H. R. 4997 
To amend the Internal Revenue Code of 1986 to provide tax relief for 
middle income taxpayers, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 22, 2004 
Mr. STENHOLM (for himself, Mr. ALEXANDER, Mr. BACA, Mr. BERRY, Mr. 
BISHOP of Georgia, Mr. BOSWELL, Mr. BOYD, Mr. CARDOZA, Mr. CASE, 
Mr. CHANDLER, Mr. COOPER, Mr. CRAMER, Mr. DAVIS of Tennessee, 
Ms. HARMAN, Ms. HERSETH, Mr. HILL, Mr. HOLDEN, Mr. LUCAS of 
Kentucky, Mr. MICHAUD, Mr. MOORE, Mr. PETERSON of Minnesota, Mr. 
POMEROY, Mr. ROSS, Mr. SANDLIN, Mr. SCHIFF, Mr. SCOTT of Georgia, 
Mr. TANNER, Mrs. TAUSCHER, Mr. TAYLOR of Mississippi, Mr. THOMP-
SON of California, Mr. TURNER of Texas, Ms. LORETTA SANCHEZ of 
California, Mr. ISRAEL, Mr. FORD, and Mr. MCINTYRE) introduced the 
following bill; which was referred to the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
tax relief for middle income taxpayers, and for other 
purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; ETC. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Fiscally Responsible Family Tax Relief Act of 2004’’.
(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 for 
this Act is as follows: 
Sec. 1. Short title; etc. 
TITLE I—EXTENSION OF CERTAIN EXPIRING PROVISIONS 
Sec. 101. Extension of family tax provisions through 2005. 
Sec. 102. Acceleration of increase in refundability of the child tax credit. 
Sec. 103. Application of EGTRRA sunset to this title. 
TITLE II—UNIFORM DEFINITION OF CHILD 
Sec. 201. Uniform definition of child, etc. 
Sec. 202. Modifications of definition of head of household. 
Sec. 203. Modifications of dependent care credit. 
Sec. 204. Modifications of child tax credit. 
Sec. 205. Modifications of earned income credit. 
Sec. 206. Modifications of deduction for personal exemption for dependents. 
Sec. 207. Technical and conforming amendments. 
Sec. 208. Effective date. 
TITLE III—REVENUE PROVISIONS 
Subtitle A—Provisions Designed To Curtail Tax Shelters 
Sec. 301. Clarification of economic substance doctrine. 
Sec. 302. Penalty for failing to disclose reportable transaction. 
Sec. 303. Accuracy-related penalty for listed transactions and other reportable 
transactions having a significant tax avoidance purpose. 
Sec. 304. Penalty for understatements attributable to transactions lacking eco-
nomic substance, etc. 
Sec. 305. Modifications of substantial understatement penalty for nonreportable 
transactions. 
Sec. 306. Tax shelter exception to confidentiality privileges relating to taxpayer 
communications. 
Sec. 307. Disclosure of reportable transactions. 
Sec. 308. Modifications to penalty for failure to register tax shelters. 
Sec. 309. Modification of penalty for failure to maintain lists of investors. 
Sec. 310. Modification of actions to enjoin certain conduct related to tax shel-
ters and reportable transactions. 
Sec. 311. Understatement of taxpayer’s liability by income tax return preparer.
Sec. 312. Penalty on failure to report interests in foreign financial accounts. 
Sec. 313. Frivolous tax submissions. 
Sec. 314. Regulation of individuals practicing before the Department of Treas-
ury. 
Sec. 315. Penalty for promoting abusive tax shelters. 
Sec. 316. Statute of limitations for taxable years for which required listed 
transactions not reported. 
Sec. 317. Denial of deduction for interest on underpayments attributable to 
nondisclosed reportable and noneconomic substance trans-
actions. 
Sec. 318. Authorization of appropriations for tax law enforcement. 
Sec. 319. Penalty for aiding and abetting the understatement of tax liability. 
Subtitle B—Enron-Related Tax Shelter Provisions 
Sec. 321. Limitation on transfer or importation of built-in losses. 
Sec. 322. No reduction of basis under section 734 in stock held by partnership 
in corporate partner. 
Sec. 323. Repeal of special rules for FASITs. 
Sec. 324. Expanded disallowance of deduction for interest on convertible debt. 
Sec. 325. Expanded authority to disallow tax benefits under section 269. 
Sec. 326. Modification of interaction between subpart F and passive foreign in-
vestment company rules. 
Subtitle C—Extension of Customs User Fees 
Sec. 331. Extension of customs user fees. 
TITLE I—EXTENSION OF 
CERTAIN EXPIRING PROVISIONS 
SEC. 
101. 
EXTENSION 
OF 
FAMILY 
TAX 
PROVISIONS 
THROUGH 2005. 
(a) CHILD CREDIT.—The table contained in section 
24(a)(2) (relating to per child amount) is amended— 
(1) by striking ‘‘2005,’’ in the second item, and 
(2) by striking ‘‘or 2004’’ in the first item and 
inserting ‘‘, 2004, or 2005’’. 
(b) MARRIAGE PENALTY RELIEF IN STANDARD DE-
DUCTION.—Paragraph (7) of section 63(c) (relating to ap-
plicable percentage) is amended by striking ‘‘174’’ and in-
serting ‘‘200’’.
(c) MARRIAGE PENALTY RELIEF IN 15-PERCENT IN-
COME TAX BRACKET.—Subparagraph (B) of section 
1(f)(8) (relating to applicable percentage) is amended by 
striking ‘‘180’’ and inserting ‘‘200’’. 
(d) 10-PERCENT RATE BRACKET.—Paragraph (1) of 
section 1(i) (relating to rate reductions after 2000) is 
amended— 
(1) by striking ‘‘2004’’ in subparagraph (B)(i) 
and inserting ‘‘2005’’, and 
(2) by inserting ‘‘and 2005’’ after ‘‘2004’’ in 
subparagraph (C)(ii). 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2004. 
SEC. 102. ACCELERATION OF INCREASE IN REFUNDABILITY 
OF THE CHILD TAX CREDIT. 
(a) ACCELERATION
OF REFUNDABILITY.—Section 
24(d)(1)(B)(i) (relating to portion of credit refundable) is 
amended by striking ‘‘(10 percent in the case of taxable 
years beginning before January 1, 2005)’’. 
(b) EARNED INCOME INCLUDES COMBAT PAY.—Sec-
tion 24(d)(1) is amended by adding at the end the fol-
lowing new sentence: ‘‘For purposes of subparagraph (B), 
any amount excluded from gross income by reason of sec-
tion 112 shall be treated as earned income which is taken
into account in computing taxable income for the taxable 
year.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2003. 
SEC. 103. APPLICATION OF EGTRRA SUNSET TO THIS TITLE. 
Each amendment made by this title shall be subject 
to title IX of the Economic Growth and Tax Relief Rec-
onciliation Act of 2001 to the same extent and in the same 
manner as the provision of such Act to which such amend-
ment relates. 
TITLE II—UNIFORM DEFINITION 
OF CHILD 
SEC. 201. UNIFORM DEFINITION OF CHILD, ETC. 
Section 152 is amended to read as follows: 
‘‘SEC. 152. DEPENDENT DEFINED. 
‘‘(a) IN GENERAL.—For purposes of this subtitle, the 
term ‘dependent’ means— 
‘‘(1) a qualifying child, or 
‘‘(2) a qualifying relative. 
‘‘(b) EXCEPTIONS.—For purposes of this section— 
‘‘(1) DEPENDENTS
INELIGIBLE.—If an indi-
vidual is a dependent of a taxpayer for any taxable 
year of such taxpayer beginning in a calendar year, 
such individual shall be treated as having no depend-