338 
retary, then such operator shall pay a penalty in ad-
dition to the tax (if any). 
‘‘(b) AMOUNT OF PENALTY.—The amount of the 
penalty under subsection (a) shall be— 
‘‘(1) for each violation described in paragraph 
(1), the greater of— 
‘‘(A) $25,000, or 
‘‘(B) $10 for each gallon of fuel involved, 
and 
‘‘(2) for each— 
‘‘(A) failure to maintain security standards 
described in paragraph (2), $1,000, and 
‘‘(B) failure to correct a violation described 
in paragraph (2), $1,000 per day for each day 
after which such violation was discovered or 
such person should have reasonably known of 
such violation. 
‘‘(c) JOINT AND SEVERAL LIABILITY.— 
‘‘(1) IN
GENERAL.—If a penalty is imposed 
under this section on any business entity, each offi-
cer, employee, or agent of such entity or other con-
tracting party who willfully participated in any act 
giving rise to such penalty shall be jointly and sever-
ally liable with such entity for such penalty.
339 
‘‘(2) AFFILIATED GROUPS.—If a business entity 
described in paragraph (1) is part of an affiliated 
group (as defined in section 1504(a)), the parent 
corporation of such entity shall be jointly and sever-
ally liable with such entity for the penalty imposed 
under this section.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is 
amended by adding after the item related to section 
6715 the following new item: 
‘‘Sec. 6715A. Tampering with or failing to maintain security re-
quirements for mechanical dye injection systems.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (c) shall take effect on the 180th day 
after the date on which the Secretary issues the regula-
tions described in subsection (b). 
SEC. 654. AUTHORITY TO INSPECT ON-SITE RECORDS. 
(a) IN GENERAL.—Section 4083(d)(1)(A) (relating 
to administrative authority), as previously amended by 
this Act, is amended by striking ‘‘and’’ at the end of clause 
(i) and by inserting after clause (ii) the following new 
clause: 
‘‘(iii) 
inspecting 
any 
books 
and 
records and any shipping papers pertaining 
to such fuel, and’’.
340 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 655. REGISTRATION OF PIPELINE OR VESSEL OPERA-
TORS REQUIRED FOR EXEMPTION OF BULK 
TRANSFERS TO REGISTERED TERMINALS OR 
REFINERIES. 
(a) IN GENERAL.—Section 4081(a)(1)(B) (relating 
to exemption for bulk transfers to registered terminals or 
refineries) is amended— 
(1) by inserting ‘‘by pipeline or vessel’’ after 
‘‘transferred in bulk’’, and 
(2) by inserting ‘‘, the operator of such pipeline 
or vessel,’’ after ‘‘the taxable fuel’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on October 1, 2004. 
(c) PUBLICATION OF REGISTERED PERSONS.—Be-
ginning on July 1, 2004, the Secretary of the Treasury 
(or the Secretary’s delegate) shall periodically publish a 
current list of persons registered under section 4101 of 
the Internal Revenue Code of 1986 who are required to 
register under such section. 
SEC. 656. DISPLAY OF REGISTRATION. 
(a) IN GENERAL.—Subsection (a) of section 4101 
(relating to registration) is amended—
341 
(1) by striking ‘‘Every’’ and inserting the fol-
lowing: 
‘‘(1) IN GENERAL.—Every’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) DISPLAY OF REGISTRATION.—Every oper-
ator of a vessel required by the Secretary to register 
under this section shall display proof of registration 
through an electronic identification device prescribed 
by the Secretary on each vessel used by such oper-
ator to transport any taxable fuel.’’. 
(b) CIVIL PENALTY FOR FAILURE TO DISPLAY REG-
ISTRATION.— 
(1) IN GENERAL.—Part I of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by inserting after section 6716 the fol-
lowing new section: 
‘‘SEC. 6717. FAILURE TO DISPLAY TAX REGISTRATION ON 
VESSELS. 
‘‘(a) FAILURE TO DISPLAY REGISTRATION.—Every 
operator of a vessel who fails to display proof of registra-
tion pursuant to section 4101(a)(2) shall pay a penalty 
of $500 for each such failure. With respect to any vessel, 
only one penalty shall be imposed by this section during 
any calendar month.
342 
‘‘(b) MULTIPLE VIOLATIONS.—In determining the 
penalty under subsection (a) on any person, subsection (a) 
shall be applied by increasing the amount in subsection 
(a) by the product of such amount and the aggregate num-
ber of penalties (if any) imposed with respect to prior 
months by this section on such person (or a related person 
or any predecessor of such person or related person). 
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed under this section with respect to any 
failure if it is shown that such failure is due to reasonable 
cause.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is 
amended by inserting after the item relating to sec-
tion 6716 the following new item: 
‘‘Sec. 6717. Failure to display tax registration on vessels.’’. 
(c) EFFECTIVE DATES.— 
(1) SUBSECTION (a).—The amendments made 
by subsection (a) shall take effect on October 1, 
2004. 
(2) SUBSECTION (b).—The amendments made 
by subsection (b) shall apply to penalties imposed 
after September 30, 2004.
343 
SEC. 657. PENALTIES FOR FAILURE TO REGISTER AND 
FAILURE TO REPORT. 
(a) INCREASED PENALTY.—Subsection (a) of section 
7272 (relating to penalty for failure to register) is amend-
ed by inserting ‘‘($10,000 in the case of a failure to reg-
ister under section 4101)’’ after ‘‘$50’’. 
(b) INCREASED CRIMINAL PENALTY.—Section 7232 
(relating to failure to register under section 4101, false 
representations of registration status, etc.) is amended by 
striking ‘‘$5,000’’ and inserting ‘‘$10,000’’. 
(c) ASSESSABLE PENALTY FOR FAILURE TO REG-
ISTER.— 
(1) IN GENERAL.—Part I of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by inserting after section 6717 the fol-
lowing new section: 
‘‘SEC. 6718. FAILURE TO REGISTER. 
‘‘(a) FAILURE TO REGISTER.—Every person who is 
required to register under section 4101 and fails to do 
so shall pay a penalty in addition to the tax (if any). 
‘‘(b) AMOUNT OF PENALTY.—The amount of the 
penalty under subsection (a) shall be— 
‘‘(1) $10,000 for each initial failure to register, 
and 
‘‘(2) $1,000 for each day thereafter such person 
fails to register.
344 
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed under this section with respect to any 
failure if it is shown that such failure is due to reasonable 
cause.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part I of subchapter B of chapter 68 is 
amended by inserting after the item relating to sec-
tion 6717 the following new item: 
‘‘Sec. 6718. Failure to register.’’. 
(d) ASSESSABLE PENALTY FOR FAILURE TO RE-
PORT.— 
(1) IN GENERAL.—Part II of subchapter B of 
chapter 68 (relating to assessable penalties) is 
amended by adding at the end the following new sec-
tion: 
‘‘SEC. 6725. FAILURE TO REPORT INFORMATION UNDER 
SECTION 4101. 
‘‘(a) IN GENERAL.—In the case of each failure de-
scribed in subsection (b) by any person with respect to 
a vessel or facility, such person shall pay a penalty of 
$10,000 in addition to the tax (if any). 
‘‘(b) FAILURES SUBJECT TO PENALTY.—For pur-
poses of subsection (a), the failures described in this sub-
section are—
345 
‘‘(1) any failure to make a report under section 
4101(d) on or before the date prescribed therefor, 
and 
‘‘(2) any failure to include all of the informa-
tion required to be shown on such report or the in-
clusion of incorrect information. 
‘‘(c) REASONABLE CAUSE EXCEPTION.—No penalty 
shall be imposed under this section with respect to any 
failure if it is shown that such failure is due to reasonable 
cause.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part II of subchapter B of chapter 68 is 
amended by adding at the end the following new 
item: 
‘‘Sec. 6725. Failure to report information under section 4101.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to penalties imposed after Sep-
tember 30, 2004. 
SEC. 658. COLLECTION FROM CUSTOMS BOND WHERE IM-
PORTER NOT REGISTERED. 
(a) TAX AT POINT OF ENTRY WHERE IMPORTER 
NOT REGISTERED.—Subpart B of part III of subchapter 
A of chapter 32, as redesignated by section 652(d), is 
amended by adding after section 4103 the following new 
section:
346 
‘‘SEC. 4104. COLLECTION FROM CUSTOMS BOND WHERE IM-
PORTER NOT REGISTERED. 
‘‘(a) IN GENERAL.—The importer of record shall be 
jointly and severally liable for the tax imposed by section 
4081(a)(1)(A)(iii) if, under regulations prescribed by the 
Secretary, any other person that is not a person who is 
registered under section 4101 is liable for such tax. 
‘‘(b) COLLECTION FROM CUSTOMS BOND.—If any 
tax for which any importer of record is liable under sub-
section (a), or for which any importer of record that is 
not a person registered under section 4101 is otherwise 
liable, is not paid on or before the last date prescribed 
for payment, the Secretary may collect such tax from the 
Customs bond posted with respect to the importation of 
the taxable fuel to which the tax relates. For purposes of 
determining the jurisdiction of any court of the United 
States or any agency of the United States, any action by 
the Secretary described in the preceding sentence shall be 
treated as an action to collect the tax from a bond de-
scribed in section 4101(b)(1) and not as an action to col-
lect from a bond relating to the importation of merchan-
dise.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of chapter 
32, as redesignated by section 652(d), is amended by add-
347 
ing after the item related to section 4103 the following 
new item: 
‘‘Sec. 4104. Collection from Customs bond where importer not 
registered.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to fuel entered after 
September 30, 2004. 
SEC. 659. MODIFICATIONS OF TAX ON USE OF CERTAIN VE-
HICLES. 
(a) PRORATION OF TAX WHERE VEHICLE SOLD.— 
(1) IN GENERAL.—Subparagraph (A) of section 
4481(c)(2) (relating to where vehicle destroyed or 
stolen) is amended by striking ‘‘destroyed or stolen’’ 
both places it appears and inserting ‘‘sold, de-
stroyed, or stolen’’. 
(2) CONFORMING AMENDMENT.—The heading 
for section 4481(c)(2) is amended by striking ‘‘DE-
STROYED
OR
STOLEN’’ and inserting ‘‘SOLD, DE-
STROYED, OR STOLEN’’. 
(b) REPEAL OF INSTALLMENT PAYMENT.— 
(1) Section 6156 (relating to installment pay-
ment of tax on use of highway motor vehicles) is re-
pealed. 
(2) The table of sections for subchapter A of 
chapter 62 is amended by striking the item relating 
to section 6156.
348 
(c) ELECTRONIC FILING.—Section 4481 is amended 
by redesignating subsection (e) as subsection (f) and by 
inserting after subsection (d) the following new subsection: 
‘‘(e) ELECTRONIC FILING.—Any taxpayer who files 
a return under this section with respect to 25 or more 
vehicles for any taxable period shall file such return elec-
tronically.’’. 
(d) REPEAL OF REDUCTION IN TAX FOR CERTAIN 
TRUCKS.—Section 4483 is amended by striking subsection 
(f). 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable periods beginning after 
the date of the enactment of this Act. 
SEC. 660. MODIFICATION OF ULTIMATE VENDOR REFUND 
CLAIMS WITH RESPECT TO FARMING. 
(a) IN GENERAL.— 
(1) REFUNDS.—Section 6427(l) is amended by 
adding at the end the following new paragraph: 
‘‘(6) REGISTERED VENDORS PERMITTED TO AD-
MINISTER CERTAIN CLAIMS FOR REFUND OF DIESEL 
FUEL AND KEROSENE SOLD TO FARMERS.— 
‘‘(A) IN GENERAL.—In the case of diesel 
fuel or kerosene used on a farm for farming 
purposes (within the meaning of section 
6420(c)), paragraph (1) shall not apply to the
349 
aggregate amount of such diesel fuel or ker-
osene if such amount does not exceed 250 gal-
lons 
(as 
determined 
under 
subsection 
(i)(5)(A)(iii)). 
‘‘(B) PAYMENT TO ULTIMATE VENDOR.— 
The amount which would (but for subparagraph 
(A)) have been paid under paragraph (1) with 
respect to any fuel shall be paid to the ultimate 
vendor of such fuel, if such vendor— 
‘‘(i) is registered under section 4101, 
and 
‘‘(ii) meets the requirements of sub-
paragraph (A), (B), or (D) of section 
6416(a)(1).’’. 
(2) FILING
OF
CLAIMS.—Section 6427(i) is 
amended by inserting at the end the following new 
paragraph: 
‘‘(5) SPECIAL
RULE
FOR
VENDOR
REFUNDS 
WITH RESPECT TO FARMERS.— 
‘‘(A) IN GENERAL.—A claim may be filed 
under subsection (l)(6) by any person with re-
spect to fuel sold by such person for any pe-
riod—
350 
‘‘(i) for which $200 or more ($100 or 
more in the case of kerosene) is payable 
under subsection (l)(6), 
‘‘(ii) which is not less than 1 week, 
and 
‘‘(iii) which is for not more than 250 
gallons for each farmer for which there is 
a claim. 
Notwithstanding subsection (l)(1), paragraph 
(3)(B) shall apply to claims filed under the pre-
ceding sentence. 
‘‘(B) TIME FOR FILING CLAIM.—No claim 
filed under this paragraph shall be allowed un-
less filed on or before the last day of the first 
quarter following the earliest quarter included 
in the claim.’’. 
(3) CONFORMING AMENDMENTS.— 
(A) Section 6427(l)(5)(A) is amended to 
read as follows: 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to diesel fuel or kerosene used by a 
State or local government.’’. 
(B) The heading for section 6427(l)(5) is 
amended by striking ‘‘FARMERS AND’’.
351 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to fuels sold for nontaxable use 
after the date of the enactment of this Act. 
SEC. 661. DEDICATION OF REVENUES FROM CERTAIN PEN-
ALTIES TO THE HIGHWAY TRUST FUND. 
(a) IN GENERAL.—Subsection (b) of section 9503 
(relating to transfer to Highway Trust Fund of amounts 
equivalent to certain taxes) is amended by redesignating 
paragraph (5) as paragraph (6) and inserting after para-
graph (4) the following new paragraph: 
‘‘(5) CERTAIN PENALTIES.—There are hereby 
appropriated to the Highway Trust Fund amounts 
equivalent to the penalties paid under sections 6715, 
6715A, 6717, 6718, 6725, 7232, and 7272 (but only 
with regard to penalties under such section related 
to failure to register under section 4101).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) The heading of subsection (b) of section 
9503 is amended by inserting ‘‘AND PENALTIES’’ 
after ‘‘TAXES’’. 
(2) The heading of paragraph (1) of section 
9503(b) is amended by striking ‘‘IN GENERAL’’ and 
inserting ‘‘CERTAIN TAXES’’.
352 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to penalties assessed after October 
1, 2004. 
SEC. 662. TAXABLE FUEL REFUNDS FOR CERTAIN ULTI-
MATE VENDORS. 
(a) IN GENERAL.—Paragraph (4) of section 6416(a) 
(relating to abatements, credits, and refunds) is amended 
to read as follows: 
‘‘(4) REGISTERED ULTIMATE VENDOR TO AD-
MINISTER
CREDITS
AND
REFUNDS
OF
GASOLINE 
TAX.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, if an ultimate vendor purchases any 
gasoline on which tax imposed by section 4081 
has been paid and sells such gasoline to an ulti-
mate purchaser described in subparagraph (C) 
or (D) of subsection (b)(2) (and such gasoline 
is for a use described in such subparagraph), 
such ultimate vendor shall be treated as the 
person (and the only person) who paid such tax, 
but only if such ultimate vendor is registered 
under section 4101. For purposes of this sub-
paragraph, if the sale of gasoline is made by 
means of a credit card, the person extending
353 
the credit to the ultimate purchaser shall be 
deemed to be the ultimate vendor. 
‘‘(B) TIMING OF CLAIMS.—The procedure 
and timing of any claim under subparagraph 
(A) shall be the same as for claims under sec-
tion 6427(i)(4), except that the rules of section 
6427(i)(3)(B) regarding electronic claims shall 
not apply unless the ultimate vendor has cer-
tified to the Secretary for the most recent quar-
ter of the taxable year that all ultimate pur-
chasers of the vendor covered by such claim are 
certified and entitled to a refund under sub-
paragraph (C) or (D) of subsection (b)(2).’’. 
(b) CREDIT CARD PURCHASES OF DIESEL FUEL OR 
KEROSENE BY STATE AND LOCAL GOVERNMENTS.—Sec-
tion 6427(l)(5)(C) (relating to nontaxable uses of diesel 
fuel, kerosene, and aviation fuel) is amended by adding 
at the end the following new flush sentence: ‘‘For purposes 
of this subparagraph, if the sale of diesel fuel or kerosene 
is made by means of a credit card, the person extending 
the credit to the ultimate purchaser shall be deemed to 
be the ultimate vendor.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on October 1, 2004.
354 
SEC. 663. TWO-PARTY EXCHANGES. 
(a) IN GENERAL.—Subpart B of part III of sub-
chapter A of chapter 32, as amended by this Act, is 
amended by adding after section 4104 the following new 
section: 
‘‘SEC. 4105. TWO-PARTY EXCHANGES. 
‘‘(a) IN GENERAL.—In a two-party exchange, the de-
livering person shall not be liable for the tax imposed 
under section 4081(a)(1)(A)(ii). 
‘‘(b) TWO-PARTY EXCHANGE.—The term ‘two-party 
exchange’ means a transaction, other than a sale, in which 
taxable fuel is transferred from a delivering person reg-
istered under section 4101 as a taxable fuel registrant fuel 
to a receiving person who is so registered where all of the 
following occur: 
‘‘(1) The transaction includes a transfer from 
the delivering person, who holds the inventory posi-
tion for taxable fuel in the terminal as reflected in 
the records of the terminal operator. 
‘‘(2) The exchange transaction occurs before or 
contemporaneous with completion of removal across 
the rack from the terminal by the receiving person. 
‘‘(3) The terminal operator in its books and 
records treats the receiving person as the person 
that removes the taxable fuel across the terminal
355 
rack for purposes of reporting the transaction to the 
Secretary. 
‘‘(4) The transaction is the subject of a written 
contract.’’. 
(b) CONFORMING AMENDMENT.—The table of sec-
tions for subpart B of part III of subchapter A of chapter 
32, as amended by this Act, is amended by adding after 
the item relating to section 4104 the following new item: 
‘‘Sec. 4105. Two-party exchanges.’’. 
(c) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 664. SIMPLIFICATION OF TAX ON TIRES. 
(a) IN GENERAL.—Subsection (a) of section 4071 is 
amended to read as follows: 
‘‘(a) IMPOSITION AND RATE OF TAX.—There is here-
by imposed on taxable tires sold by the manufacturer, pro-
ducer, or importer thereof a tax at the rate of 9.4 cents 
(4.7 cents in the case of a biasply tire) for each 10 pounds 
so much of the maximum rated load capacity thereof as 
exceeds 3,500 pounds.’’ 
(b) TAXABLE TIRE.—Section 4072 is amended by re-
designating subsections (a) and (b) as subsections (b) and 
(c), respectively, and by inserting before subsection (b) (as 
so redesignated) the following new subsection:
356 
‘‘(a) TAXABLE TIRE.—For purposes of this chapter, 
the term ‘taxable tire’ means any tire of the type used 
on highway vehicles if wholly or in part made of rubber 
and if marked pursuant to Federal regulations for high-
way use.’’ 
(c) EXEMPTION FOR TIRES SOLD TO DEPARTMENT 
OF DEFENSE.—Section 4073 is amended to read as fol-
lows: 
‘‘SEC. 4073. EXEMPTIONS. 
‘‘The tax imposed by section 4071 shall not apply to 
tires sold for the exclusive use of the Department of De-
fense or the Coast Guard.’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Section 4071 is amended by striking sub-
section (c) and by moving subsection (e) after sub-
section (b) and redesignating subsection (e) as sub-
section (c). 
(2) The item relating to section 4073 in the 
table of sections for part II of subchapter A of chap-
ter 32 is amended to read as follows: 
‘‘Sec. 4073. Exemptions.’’. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales in calendar years begin-
ning more than 30 days after the date of the enactment 
of this Act.
357 
Subtitle D—Nonqualified Deferred 
Compensation Plans 
SEC. 671. TREATMENT OF NONQUALIFIED DEFERRED COM-
PENSATION PLANS. 
(a) IN GENERAL.—Subpart A of part I of subchapter 
D of chapter 1 is amended by adding at the end the fol-
lowing new section: 
‘‘SEC. 409A. INCLUSION IN GROSS INCOME OF DEFERRED 
COMPENSATION UNDER NONQUALIFIED DE-
FERRED COMPENSATION PLANS. 
‘‘(a) RULES
RELATING
TO
CONSTRUCTIVE
RE-
CEIPT.— 
‘‘(1) IN GENERAL.— 
‘‘(A) GROSS INCOME INCLUSION.—In the 
case of a nonqualified deferred compensation 
plan, all compensation deferred under the plan 
for all taxable years (to the extent not subject 
to a substantial risk of forfeiture and not pre-
viously included in gross income) shall be in-
cludible in gross income for the taxable year 
unless at all times during the taxable year the 
plan meets the requirements of paragraphs (2), 
(3), and (4) and is operated in accordance with 
such requirements.
358 
‘‘(B) INTEREST
ON
TAX
LIABILITY
PAY-
ABLE
WITH
RESPECT
TO
PREVIOUSLY
DE-
FERRED COMPENSATION.— 
‘‘(i) IN GENERAL.—If compensation is 
required to be included in gross income 
under subparagraph (A) for a taxable year, 
the tax imposed by this chapter for such 
taxable year shall be increased by the 
amount of interest determined under 
clause (ii). 
‘‘(ii) INTEREST.—For purposes of 
clause (i), the interest determined under 
this clause for any taxable year is the 
amount of interest at the underpayment 
rate plus 1 percentage point on the under-
payments that would have occurred had 
the deferred compensation been includible 
in gross income for the taxable year in 
which first deferred or, if later, the first 
taxable year in which such deferred com-
pensation is not subject to a substantial 
risk of forfeiture. 
‘‘(2) DISTRIBUTIONS.— 
‘‘(A) IN GENERAL.—The requirements of 
this paragraph are met if the plan provides that
359 
compensation deferred under the plan may not 
be distributed earlier than— 
‘‘(i) separation from service as deter-
mined by the Secretary (except as provided 
in subparagraph (B)(i)), 
‘‘(ii) the date the participant becomes 
disabled (within the meaning of subpara-
graph (C)), 
‘‘(iii) death, 
‘‘(iv) a specified time (or pursuant to 
a fixed schedule) specified under the plan 
at the date of the deferral of such com-
pensation, 
‘‘(v) to the extent provided by the 
Secretary, a change in the ownership or ef-
fective control of the corporation, or in the 
ownership of a substantial portion of the 
assets of the corporation, or 
‘‘(vi) the occurrence of an unforesee-
able emergency. 
‘‘(B) SPECIAL RULES.— 
‘‘(i) SPECIFIED EMPLOYEES.—In the 
case of specified employees, the require-
ment of subparagraph (A)(i) is met only if 
distributions may not be made earlier than
360 
6 months after the date of separation from 
service. For purposes of the preceding sen-
tence, a specified employee is a key em-
ployee (as defined in section 416(i)) of a 
corporation the stock in which is publicly 
traded on an established securities market 
or otherwise. 
‘‘(ii) 
UNFORESEEABLE
EMER-
GENCY.—For purposes of subparagraph 
(A)(vi)— 
‘‘(I) IN
GENERAL.—The term 
‘unforeseeable emergency’ means a se-
vere financial hardship to the partici-
pant resulting from a sudden and un-
expected illness or accident of the par-
ticipant, the participant’s spouse, or a 
dependent (as defined in section 
152(a)) of the participant, loss of the 
participant’s property due to casualty, 
or other similar extraordinary and un-
foreseeable circumstances arising as a 
result of events beyond the control of 
the participant. 
‘‘(II) LIMITATION ON DISTRIBU-
TIONS.—The requirement of subpara-
361 
graph (A)(vi) is met only if, as deter-
mined under regulations of the Sec-
retary, the amounts distributed with 
respect to an emergency do not exceed 
the amounts necessary to satisfy such 
emergency plus amounts necessary to 
pay taxes reasonably anticipated as a 
result of the distribution, after taking 
into account the extent to which such 
hardship is or may be relieved 
through reimbursement or compensa-
tion by insurance or otherwise or by 
liquidation of the participant’s assets 
(to the extent the liquidation of such 
assets would not itself cause severe fi-
nancial hardship). 
‘‘(C) DISABLED.—For purposes of sub-
paragraph (A)(ii), a participant shall be consid-
ered disabled if the participant— 
‘‘(i) is unable to engage in any sub-
stantial gainful activity by reason of any 
medically determinable physical or mental 
impairment which can be expected to result 
in death or can be expected to last for a
363 
election to defer such compensation is made not 
later than the close of the preceding taxable 
year or at such other time as provided in regu-
lations. In the case of the first year in which a 
participant becomes eligible to participate in the 
plan, such election may be made with respect to 
services to be performed subsequent to the elec-
tion within 30 days after the date the partici-
pant becomes eligible to participate in such 
plan. 
‘‘(C) CHANGES IN TIME AND FORM OF DIS-
TRIBUTION.—The requirements of this subpara-
graph are met if, in the case of a plan which 
permits under a subsequent election a delay in 
a payment or a change in the form of pay-
ment— 
‘‘(i) the plan requires that such elec-
tion may not take effect until at least 12 
months after the date on which the elec-
tion is made, 
‘‘(ii) in the case an election related to 
a payment not described in clause (ii), (iii), 
or (vi) of paragraph (2)(A), the plan re-
quires that the first payment with respect 
to which such election is made be deferred
364 
for a period of not less than 5 years from 
the date such payment would otherwise 
have been made, and 
‘‘(iii) the plan requires that any elec-
tion related to a payment described in 
paragraph (2)(A)(iv) may not be made less 
than 12 months prior to the date of the 
first scheduled payment under such para-
graph. 
‘‘(b) RULES RELATING TO FUNDING.— 
‘‘(1) OFFSHORE
PROPERTY
IN
A
TRUST.—In 
the case of assets set aside (directly or indirectly) in 
a trust (or other arrangement determined by the 
Secretary) for purposes of paying deferred com-
pensation under a nonqualified deferred compensa-
tion plan, for purposes of section 83 such assets 
shall be treated as property transferred in connec-
tion with the performance of services whether or not 
such assets are available to satisfy claims of general 
creditors— 
‘‘(A) at the time set aside if such assets 
are located outside of the United States, or 
‘‘(B) at the time transferred if such assets 
are subsequently transferred outside of the 
United States.
365 
‘‘(2) EMPLOYER’S FINANCIAL HEALTH.—In the 
case of compensation deferred under a nonqualified 
deferred compensation plan, there is a transfer of 
property within the meaning of section 83 with re-
spect to such compensation as of the earlier of— 
‘‘(A) the date on which the plan first pro-
vides that assets will become restricted to the 
provision of benefits under the plan in connec-
tion with a change in the employer’s financial 
health, or 
‘‘(B) the date on which assets are so re-
stricted. 
‘‘(3) 
INCOME
INCLUSION
FOR
OFFSHORE 
TRUSTS AND EMPLOYER’S FINANCIAL HEALTH.—For 
each taxable year that assets treated as transferred 
under this subsection remain set aside in a trust or 
other arrangement subject to paragraph (1) or (2), 
any increase in value in, or earnings with respect to, 
such assets shall be treated as an additional transfer 
of property under this subsection (to the extent not 
previously included in income). 
‘‘(4) INTEREST
ON
TAX
LIABILITY
PAYABLE 
WITH RESPECT TO TRANSFERRED PROPERTY.— 
‘‘(A) IN
GENERAL.—If amounts are re-
quired to be included in gross income by reason
366 
of paragraph (1) or (2) for a taxable year, the 
tax imposed by this chapter for such taxable 
year shall be increased by the amount of inter-
est determined under subparagraph (B). 
‘‘(B) INTEREST.—The interest determined 
under this subparagraph for any taxable year is 
the amount of interest at the underpayment 
rate plus 1 percentage point on the underpay-
ments that would have occurred had the 
amounts so required to be included in gross in-
come by paragraph (1) or (2) been includible in 
gross income for the taxable year in which first 
deferred or, if later, the first taxable year in 
which such deferred compensation is not subject 
to a substantial risk of forfeiture. 
‘‘(c) NO INFERENCE ON EARLIER INCOME INCLU-
SION OR REQUIREMENT OF LATER INCLUSION.—Nothing 
in this section shall be construed to prevent the inclusion 
of amounts in gross income under any other provision of 
this chapter or any other rule of law earlier than the time 
provided in this section. Any amount included in gross in-
come under this section shall not be required to be in-
cluded in gross income under any other provision of this 
chapter or any other rule of law later than the time pro-
vided in this section.
367 
‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) NONQUALIFIED
DEFERRED
COMPENSA-
TION PLAN.—The term ‘nonqualified deferred com-
pensation plan’ means any plan that provides for the 
deferral of compensation, other than— 
‘‘(A) a qualified employer plan, and 
‘‘(B) any bona fide vacation leave, sick 
leave, compensatory time, disability pay, or 
death benefit plan. 
‘‘(2) QUALIFIED EMPLOYER PLAN.—The term 
‘qualified employer plan’ means— 
‘‘(A) any plan, contract, pension, account, 
or trust described in subparagraph (A) or (B) 
of section 219(g)(5), and 
‘‘(B) any eligible deferred compensation 
plan (within the meaning of section 457(b)) of 
an employer described in section 457(e)(1)(A). 
‘‘(3) PLAN INCLUDES ARRANGEMENTS, ETC.— 
The term ‘plan’ includes any agreement or arrange-
ment, including an agreement or arrangement that 
includes one person. 
‘‘(4) SUBSTANTIAL RISK OF FORFEITURE.—The 
rights of a person to compensation are subject to a 
substantial risk of forfeiture if such person’s rights
368 
to such compensation are conditioned upon the fu-
ture performance of substantial services by any indi-
vidual. 
‘‘(5) TREATMENT OF EARNINGS.—References to 
deferred compensation shall be treated as including 
references to income (whether actual or notional) at-
tributable to such compensation or such income. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary or appropriate to 
carry out the purposes of this section, including regula-
tions— 
‘‘(1) 
providing 
for 
the 
determination 
of 
amounts of deferral in the case of a nonqualified de-
ferred compensation plan which is a defined benefit 
plan, 
‘‘(2) relating to changes in the ownership and 
control of a corporation or assets of a corporation 
for purposes of subsection (a)(2)(A)(v), 
‘‘(3) exempting arrangements from the applica-
tion of subsection (b) if such arrangements will not 
result in an improper deferral of United States tax 
and will not result in assets being effectively beyond 
the reach of creditors, 
‘‘(4) defining financial health for purposes of 
subsection (b)(2), and
369 
‘‘(5) disregarding a substantial risk of for-
feiture in cases where necessary to carry out the 
purposes of this section.’’. 
(b) W–2 FORMS.— 
(1) IN
GENERAL.—Subsection (a) of section 
6051 (relating to receipts for employees) is amended 
by striking ‘‘and’’ at the end of paragraph (11), by 
striking the period at the end of paragraph (12) and 
inserting ‘‘, and’’, and by inserting after paragraph 
(12) the following new paragraph: 
‘‘(13) the total amount of deferrals under a 
nonqualified deferred compensation plan (within the 
meaning of section 409A(d)).’’. 
(2) THRESHOLD.—Subsection (a) of section 
6051 is amended by adding at the end the following: 
‘‘In the case of the amounts required to be shown 
by paragraph (13), the Secretary (by regulation) 
may establish a minimum amount of deferrals below 
which paragraph (13) does not apply and may pro-
vide that paragraph (13) does not apply with respect 
to amounts of deferrals which are not reasonably as-
certainable.’’. 
(c) CONFORMING AND CLERICAL AMENDMENTS.— 
(1) Section 414(b) is amended by inserting 
‘‘409A,’’ after ‘‘408(p),’’.
370 
(2) Section 414(c) is amended by inserting 
‘‘409A,’’ after ‘‘408(p),’’. 
(3) The table of sections for such subpart A of 
part I of subchapter D of chapter 1 is amended by 
adding at the end the following new item: 
‘‘Sec. 409A. Inclusion in gross income of deferred compensation 
under nonqualified deferred compensation plans.’’. 
(d) EFFECTIVE DATE.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to amounts deferred after 
June 3, 2004. 
(2) CERTAIN
AMOUNTS
DEFERRED
IN
2004 
UNDER
CERTAIN
IRREVOCABLE
ELECTIONS
AND 
BINDING ARRANGEMENTS.—The amendments made 
by this section shall not apply to amounts deferred 
after June 3, 2004, and before January 1, 2005, 
pursuant to an irrevocable election or binding ar-
rangement made before June 4, 2004. 
(3) EARNINGS ATTRIBUTABLE TO AMOUNT PRE-
VIOUSLY
DEFERRED.—The amendments made by 
this section shall apply to earnings on deferred com-
pensation only to the extent that such amendments 
apply to such compensation. 
(e) GUIDANCE RELATING TO CHANGE OF OWNER-
SHIP OR CONTROL.—Not later than 90 days after the date 
of the enactment of this Act, the Secretary of the Treasury
371 
shall issue guidance on what constitutes a change in own-
ership or effective control for purposes of section 409A 
of the Internal Revenue Code of 1986, as added by this 
section. 
(f) GUIDANCE RELATING TO TERMINATION OF CER-
TAIN EXISTING ARRANGEMENTS.—Not later than 90 days 
after the date of the enactment of this Act, the Secretary 
of the Treasury shall issue guidance providing a limited 
period during which an individual participating in a non-
qualified deferred compensation plan adopted before June 
4, 2004, may, without violating the requirements of para-
graphs (2), (3), and (4) of section 409A(a)(2) of the Inter-
nal Revenue Code of 1986 (as added by this section), ter-
minate participation or cancel an outstanding deferral 
election with regard to amounts earned after June 3, 
2004, if such amounts are includible in income as earned. 
Subtitle E—Other Revenue 
Provisions 
SEC. 681. 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:
372 
‘‘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. 
‘‘(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)— 
‘‘(A) to locate and contact any taxpayer 
specified by the Secretary, 
‘‘(B) to request full payment from such 
taxpayer of an amount of Federal tax specified 
by the Secretary and, if such request cannot be 
met by the taxpayer, to offer the taxpayer an 
installment agreement providing for full pay-
ment of such amount during a period not to ex-
ceed 5 years, and 
‘‘(C) to obtain financial information speci-
fied by the Secretary with respect to such tax-
payer, 
‘‘(2) prohibits each person providing such serv-
ices under such contract from committing any act or 
omission which employees of the Internal Revenue
373 
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 subcontractors 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 
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-
374 
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 collec-
tion actions by persons performing services under a 
qualified tax collection contract, see section 7433A. 
‘‘(2) For application of Taxpayer Assistance Or-
ders 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’’. 
(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:
375 
‘‘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)— 
‘‘(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.’’.
376 
(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 qualified 
tax collection contracts.’’. 
(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 
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:
377 
‘‘(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. 
SEC. 682. TREATMENT OF CHARITABLE CONTRIBUTIONS OF 
PATENTS AND SIMILAR PROPERTY. 
(a) IN GENERAL.—Subparagraph (B) of section 
170(e)(1) is amended by striking ‘‘or’’ at the end of clause 
(i), by adding ‘‘or’’ at the end of clause (ii), and by insert-
ing after clause (ii) the following new clause: 
‘‘(iii) of any patent, copyright (other 
than a copyright described in section 
1221(a)(3) or 1231(b)(1)(C)), trademark, 
trade name, trade secret, know-how, soft-
ware (other than software described in sec-
tion 197(e)(3)(A)(i)), or similar property,
378 
or applications or registrations of such 
property,’’. 
(b) CERTAIN DONEE INCOME FROM INTELLECTUAL 
PROPERTY TREATED AS AN ADDITIONAL CHARITABLE 
CONTRIBUTION.—Section 170 is amended by redesig-
nating subsection (m) as subsection (n) and by inserting 
after subsection (l) the following new subsection: 
‘‘(m) CERTAIN DONEE INCOME FROM INTELLEC-
TUAL PROPERTY TREATED AS AN ADDITIONAL CHARI-
TABLE CONTRIBUTION.— 
‘‘(1) TREATMENT
AS
ADDITIONAL
CONTRIBU-
TION.—In the case of a taxpayer who makes a quali-
fied intellectual property contribution, the deduction 
allowed under subsection (a) for each taxable year of 
the taxpayer ending on or after the date of such con-
tribution shall be increased (subject to the limita-
tions under subsection (b)) by the applicable per-
centage of qualified donee income with respect to 
such contribution which is properly allocable to such 
year under this subsection. 
‘‘(2) REDUCTION IN ADDITIONAL DEDUCTIONS 
TO EXTENT OF INITIAL DEDUCTION.—With respect 
to any qualified intellectual property contribution, 
the deduction allowed under subsection (a) shall be 
increased under paragraph (1) only to the extent
379 
that the aggregate amount of such increases with re-
spect to such contribution exceed the amount al-
lowed as a deduction under subsection (a) with re-
spect to such contribution determined without re-
gard to this subsection. 
‘‘(3) QUALIFIED
DONEE
INCOME.—For pur-
poses of this subsection, the term ‘qualified donee 
income’ means any net income received by or ac-
crued to the donee which is properly allocable to the 
qualified intellectual property. 
‘‘(4) ALLOCATION
OF
QUALIFIED
DONEE
IN-
COME
TO
TAXABLE
YEARS
OF
DONOR.—For pur-
poses of this subsection, qualified donee income shall 
be treated as properly allocable to a taxable year of 
the donor if such income is received by or accrued 
to the donee for the taxable year of the donee which 
ends within or with such taxable year of the donor. 
‘‘(5) 10-YEAR LIMITATION.—Income shall not 
be treated as properly allocable to qualified intellec-
tual property for purposes of this subsection if such 
income is received by or accrued to the donee after 
the 10-year period beginning on the date of the con-
tribution of such property. 
‘‘(6) BENEFIT LIMITED TO LIFE OF INTELLEC-
TUAL PROPERTY.—Income shall not be treated as
380 
properly allocable to qualified intellectual property 
for purposes of this subsection if such income is re-
ceived by or accrued to the donee after the expira-
tion of the legal life of such property. 
‘‘(7) APPLICABLE PERCENTAGE.—For purposes 
of this subsection, the term ‘applicable percentage’ 
means the percentage determined under the fol-
lowing table which corresponds to a taxable year of 
the donor ending on or after the date of the quali-
fied intellectual property contribution: 
‘‘Taxable Year of Donor 
Ending on or After 
Applicable 
Date of Contribution: 
Percentage: 
1st ......................................................................................................
100
2nd .....................................................................................................
100
3rd ......................................................................................................
4th ......................................................................................................
5th ......................................................................................................
6th ......................................................................................................
7th ......................................................................................................
8th ......................................................................................................
9th ......................................................................................................
10th ....................................................................................................
11th ....................................................................................................
12th ....................................................................................................
10. 
‘‘(8) QUALIFIED
INTELLECTUAL
PROPERTY 
CONTRIBUTION.—For purposes of this subsection, 
the term ‘qualified intellectual property contribution’ 
means any charitable contribution of qualified intel-
lectual property— 
‘‘(A) the amount of which taken into ac-
count under this section is reduced by reason of 
subsection (e)(1), and
381 
‘‘(B) with respect to which the donor in-
forms the donee at the time of such contribu-
tion that the donor intends to treat such con-
tribution as a qualified intellectual property 
contribution for purposes of this subsection and 
section 6050L. 
‘‘(9) QUALIFIED INTELLECTUAL PROPERTY.— 
For purposes of this subsection, the term ‘qualified 
intellectual property’ means property described in 
subsection (e)(1)(B)(iii) (other than property con-
tributed to or for the use of an organization de-
scribed in subsection (e)(1)(B)(ii)). 
‘‘(10) OTHER SPECIAL RULES.— 
‘‘(A) APPLICATION
OF
LIMITATIONS
ON 
CHARITABLE
CONTRIBUTIONS.—Any increase 
under this subsection of the deduction provided 
under subsection (a) shall be treated for pur-
poses of subsection (b) as a deduction which is 
attributable to a charitable contribution to the 
donee to which such increase relates. 
‘‘(B) 
NET
INCOME
DETERMINED
BY 
DONEE.—The net income taken into account 
under paragraph (3) shall not exceed the 
amount of such income reported under section 
6050L(b)(1).
382 
‘‘(C) DEDUCTION LIMITED TO 12 TAXABLE 
YEARS.—Except as may be provided under sub-
paragraph (D)(i), this subsection shall not 
apply with respect to any qualified intellectual 
property contribution for any taxable year of 
the donor after the 12th taxable year of the 
donor which ends on or after the date of such 
contribution. 
‘‘(D) REGULATIONS.—The Secretary may 
issue regulations or other guidance to carry out 
the purposes of this subsection, including regu-
lations or guidance— 
‘‘(i) modifying the application of this 
subsection in the case of a donor or donee 
with a short taxable year, and 
‘‘(ii) providing for the determination 
of an amount to be treated as net income 
of the donee which is properly allocable to 
qualified intellectual property in the case 
of a donee who uses such property to fur-
ther a purpose or function constituting the 
basis of the donee’s exemption under sec-
tion 501 (or, in the case of a governmental 
unit, any purpose described in section 
170(c)) and does not possess a right to re-
383 
ceive any payment from a third party with 
respect to such property.’’. 
(c) REPORTING REQUIREMENTS.— 
(1) IN GENERAL.—Section 6050L (relating to 
returns relating to certain dispositions of donated 
property) is amended to read as follows: 
‘‘SEC. 6050L. RETURNS RELATING TO CERTAIN DONATED 
PROPERTY. 
‘‘(a) DISPOSITIONS OF DONATED PROPERTY.— 
‘‘(1) IN GENERAL.—If the donee of any chari-
table deduction property sells, exchanges, or other-
wise disposes of such property within 2 years after 
its receipt, the donee shall make a return (in accord-
ance with forms and regulations prescribed by the 
Secretary) showing— 
‘‘(A) the name, address, and TIN of the 
donor, 
‘‘(B) a description of the property, 
‘‘(C) the date of the contribution, 
‘‘(D) the amount received on the disposi-
tion, and 
‘‘(E) the date of such disposition. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section—
384 
‘‘(A) 
CHARITABLE
DEDUCTION
PROP-
ERTY.—The term ‘charitable deduction prop-
erty’ means any property (other than publicly 
traded securities) contributed in a contribution 
for which a deduction was claimed under sec-
tion 170 if the claimed value of such property 
(plus the claimed value of all similar items of 
property donated by the donor to 1 or more 
donees) exceeds $5,000. 
‘‘(B) PUBLICLY
TRADED
SECURITIES.— 
The term ‘publicly traded securities’ means se-
curities for which (as of the date of the con-
tribution) market quotations are readily avail-
able on an established securities market. 
‘‘(b) QUALIFIED INTELLECTUAL PROPERTY CON-
TRIBUTIONS.— 
‘‘(1) IN GENERAL.—Each donee with respect to 
a qualified intellectual property contribution shall 
make a return (at such time and in such form and 
manner as the Secretary may by regulations pre-
scribe) with respect to each specified taxable year of 
the donee showing— 
‘‘(A) the name, address, and TIN of the 
donor,
385 
‘‘(B) a description of the qualified intellec-
tual property contributed, 
‘‘(C) the date of the contribution, and 
‘‘(D) the amount of net income of the 
donee for the taxable year which is properly al-
locable to the qualified intellectual property (de-
termined without regard to paragraph (10)(B) 
of section 170(m) and with the modifications 
described in paragraphs (5) and (6) of such 
section). 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) IN
GENERAL.—Terms used in this 
subsection which are also used in section 
170(m) have the respective meanings given 
such terms in such section. 
‘‘(B) SPECIFIED
TAXABLE
YEAR.—The 
term ‘specified taxable year’ means, with re-
spect to any qualified intellectual property con-
tribution, any taxable year of the donee any 
portion of which is part of the 10-year period 
beginning on the date of such contribution. 
‘‘(c) STATEMENT TO BE FURNISHED TO DONORS.— 
Every person making a return under subsection (a) or (b) 
shall furnish a copy of such return to the donor at such
386 
time and in such manner as the Secretary may by regula-
tions prescribe.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subpart A of part II of subchapter A of 
chapter 61 is amended by striking the item relating 
to section 6050L and inserting the following new 
item: 
‘‘Sec. 6050L. Returns relating to certain donated property.’’. 
(d) COORDINATION
WITH
APPRAISAL
REQUIRE-
MENTS.—Subclause (I) of section 170(f)(11)(A)(ii), as 
added by section 683, is amended by inserting ‘‘subsection 
(e)(1)(B)(iii) or’’ before ‘‘section 1221(a)(1)’’. 
(e) ANTI-ABUSE RULES.—The Secretary of the 
Treasury may prescribe such regulations or other guid-
ance as may be necessary or appropriate to prevent the 
avoidance of the purposes of section 170(e)(1)(B)(iii) of 
the Internal Revenue Code of 1986 (as added by sub-
section (a)), including preventing— 
(1) the circumvention of the reduction of the 
charitable deduction by embedding or bundling the 
patent or similar property as part of a charitable 
contribution of property that includes the patent or 
similar property, 
(2) the manipulation of the basis of the prop-
erty to increase the amount of the charitable deduc-
tion through the use of related persons, pass-thru
387 
entities, or other intermediaries, or through the use 
of any provision of law or regulation (including the 
consolidated return regulations), and 
(3) a donor from changing the form of the pat-
ent or similar property to property of a form for 
which different deduction rules would apply. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made after June 
3, 2004. 
SEC. 683. INCREASED REPORTING FOR NONCASH CHARI-
TABLE CONTRIBUTIONS. 
(a) IN GENERAL.—Subsection (f) of section 170 (re-
lating to disallowance of deduction in certain cases and 
special rules) is amended by adding after paragraph (10) 
the following new paragraph: 
‘‘(11) QUALIFIED APPRAISAL AND OTHER DOC-
UMENTATION FOR CERTAIN CONTRIBUTIONS.— 
‘‘(A) IN GENERAL.— 
‘‘(i) DENIAL OF DEDUCTION.—In the 
case of an individual, partnership, or cor-
poration, no deduction shall be allowed 
under subsection (a) for any contribution 
of property for which a deduction of more 
than $500 is claimed unless such person 
meets the requirements of subparagraphs
388 
(B), (C), and (D), as the case may be, 
with respect to such contribution. 
‘‘(ii) EXCEPTIONS.— 
‘‘(I) READILY
VALUED
PROP-
ERTY.—Subparagraphs (C) and (D) 
shall not apply to cash, property de-
scribed in section 1221(a)(1), and 
publicly traded securities (as defined 
in section 6050L(a)(2)(B)). 
‘‘(II) 
REASONABLE
CAUSE.— 
Clause (i) shall not apply if it is 
shown that the failure to meet such 
requirements is due to reasonable 
cause and not to willful neglect. 
‘‘(B) PROPERTY
DESCRIPTION
FOR
CON-
TRIBUTIONS OF MORE THAN $500.—In the case 
of contributions of property for which a deduc-
tion of more than $500 is claimed, the require-
ments of this subparagraph are met if the indi-
vidual, partnership or corporation includes with 
the return for the taxable year in which the 
contribution is made a description of such prop-
erty and such other information as the Sec-
retary may require. The requirements of this 
subparagraph shall not apply to a C corporation
389 
which is not a personal service corporation or a 
closely held C corporation. 
‘‘(C) QUALIFIED
APPRAISAL
FOR
CON-
TRIBUTIONS
OF
MORE
THAN
$5,000.—In the 
case of contributions of property for which a 
deduction of more than $5,000 is claimed, the 
requirements of this subparagraph are met if 
the individual, partnership, or corporation ob-
tains a qualified appraisal of such property and 
attaches to the return for the taxable year in 
which such contribution is made such informa-
tion regarding such property and such appraisal 
as the Secretary may require. 
‘‘(D) SUBSTANTIATION
FOR
CONTRIBU-
TIONS OF MORE THAN $500,000.—In the case of 
contributions of property for which a deduction 
of more than $500,000 is claimed, the require-
ments of this subparagraph are met if the indi-
vidual, partnership, or corporation attaches to 
the return for the taxable year a qualified ap-
praisal of such property. 
‘‘(E) QUALIFIED
APPRAISAL.—For pur-
poses of this paragraph, the term ‘qualified ap-
praisal’ means, with respect to any property, an 
appraisal of such property which is treated for
390 
purposes of this paragraph as a qualified ap-
praisal under regulations or other guidance pre-
scribed by the Secretary. 
‘‘(F) AGGREGATION OF SIMILAR ITEMS OF 
PROPERTY.—For 
purposes 
of 
determining 
thresholds under this paragraph, property and 
all similar items of property donated to 1 or 
more donees shall be treated as 1 property. 
‘‘(G) SPECIAL RULE FOR PASS-THRU ENTI-
TIES.—In the case of a partnership or S cor-
poration, this paragraph shall be applied at the 
entity level, except that the deduction shall be 
denied at the partner or shareholder level. 
‘‘(H) REGULATIONS.—The Secretary may 
prescribe such regulations as may be necessary 
or appropriate to carry out the purposes of this 
paragraph, including regulations that may pro-
vide that some or all of the requirements of this 
paragraph do not apply in appropriate cases.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to contributions made after June 
3, 2004.
391 
SEC. 684. DONATIONS OF MOTOR VEHICLES, BOATS, AND 
AIRCRAFT. 
(a) IN GENERAL.—Subsection (f) of section 170 (re-
lating to disallowance of deduction in certain cases and 
special rules) is amended by adding after paragraph (11) 
the following new paragraph: 
‘‘(12) CONTRIBUTIONS
OF
MOTOR
VEHICLES, 
BOATS, AND AIRCRAFT.— 
‘‘(A) IN GENERAL.—Except as provided in 
regulations or other guidance, in the case of a 
contribution of a specified vehicle to which 
paragraph (8) applies, no deduction shall be al-
lowed under subsection (a) for such contribu-
tion unless the taxpayer obtains a qualified ap-
praisal of the specified vehicle on or before the 
date of such contribution. 
‘‘(B) EXCEPTION FOR INVENTORY PROP-
ERTY.—Subparagraph (A) shall not apply to 
property 
which 
is 
described 
in 
section 
1221(a)(1). 
‘‘(C) SPECIFIED VEHICLE.—For purposes 
of this paragraph, the term ‘specified vehicle’ 
means any— 
‘‘(i) motor vehicle manufactured pri-
marily for use on public streets, roads, and 
highways,
392 
‘‘(ii) boat, or 
‘‘(iii) aircraft. 
‘‘(D) QUALIFIED
APPRAISAL.—For pur-
poses of this paragraph, the term ‘qualified ap-
praisal’ means any appraisal which is treated 
for purposes of this paragraph as a qualified 
appraisal under regulations or other guidance 
prescribed by the Secretary. 
‘‘(E) REGULATIONS
OR
OTHER
GUID-
ANCE.—The Secretary shall prescribe such reg-
ulations or other guidance as may be necessary 
to carry out the purposes of this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to contributions made after 
June 3, 2004. 
SEC. 685. EXTENSION OF AMORTIZATION OF INTANGIBLES 
TO SPORTS FRANCHISES. 
(a) IN GENERAL.—Section 197(e) (relating to excep-
tions to definition of section 197 intangible) is amended 
by striking paragraph (6) and by redesignating para-
graphs (7) and (8) as paragraphs (6) and (7), respectively. 
(b) CONFORMING AMENDMENTS.— 
(1)(A) Section 1056 (relating to basis limitation 
for player contracts transferred in connection with 
the sale of a franchise) is repealed.
393 
(B) The table of sections for part IV of sub-
chapter O of chapter 1 is amended by striking the 
item relating to section 1056. 
(2) Section 1245(a) (relating to gain from dis-
position of certain depreciable property) is amended 
by striking paragraph (4). 
(3) Section 1253 (relating to transfers of fran-
chises, trademarks, and trade names) is amended by 
striking subsection (e). 
(c) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to property acquired after the date of the 
enactment of this Act. 
(2) SECTION 1245.—The amendment made by 
subsection (b)(2) shall apply to franchises acquired 
after the date of the enactment of this Act. 
SEC. 686. MODIFICATION OF CONTINUING LEVY ON PAY-
MENTS TO FEDERAL VENDERS. 
(a) IN GENERAL.—Section 6331(h) (relating to con-
tinuing levy on certain payments) is amended by adding 
at the end the following new paragraph: 
‘‘(3) INCREASE
IN
LEVY
FOR
CERTAIN
PAY-
MENTS.—Paragraph (1) shall be applied by sub-
stituting ‘100 percent’ for ‘15 percent’ in the case
394 
of any specified payment due to a vendor of goods 
or services sold or leased to the Federal Govern-
ment.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 687. MODIFICATION OF STRADDLE RULES. 
(a) RULES RELATING TO IDENTIFIED STRADDLES.— 
(1) IN GENERAL.—Subparagraph (A) of section 
1092(a)(2) (relating to special rule for identified 
straddles) is amended to read as follows: 
‘‘(A) IN
GENERAL.—In the case of any 
straddle which is an identified straddle— 
‘‘(i) paragraph (1) shall not apply 
with respect to identified positions com-
prising the identified straddle, 
‘‘(ii) if there is any loss with respect 
to any identified position of the identified 
straddle, the basis of each of the identified 
offsetting positions in the identified strad-
dle shall be increased by an amount which 
bears the same ratio to the loss as the un-
recognized gain with respect to such offset-
ting position bears to the aggregate unrec-
395 
ognized gain with respect to all such off-
setting positions, and 
‘‘(iii) any loss described in clause (ii) 
shall not otherwise be taken into account 
for purposes of this title.’’. 
(2) 
IDENTIFIED
STRADDLE.—Section 
1092(a)(2)(B) 
(defining 
identified 
straddle) 
is 
amended— 
(A) by striking clause (ii) and inserting the 
following: 
‘‘(ii) to the extent provided by regula-
tions, the value of each position of which 
(in the hands of the taxpayer immediately 
before the creation of the straddle) is not 
less than the basis of such position in the 
hands of the taxpayer at the time the 
straddle is created, and’’, and 
(B) by adding at the end the following new 
flush sentence: 
‘‘The Secretary shall prescribe regulations 
which specify the proper methods for clearly 
identifying a straddle as an identified straddle 
(and the positions comprising such straddle), 
which specify the rules for the application of 
this section for a taxpayer which fails to prop-
396 
erly identify the positions of an identified strad-
dle, and which specify the ordering rules in 
cases where a taxpayer disposes of less than an 
entire position which is part of an identified 
straddle.’’. 
(3) UNRECOGNIZED GAIN.—Section 1092(a)(3) 
(defining unrecognized gain) is amended by redesig-
nating subparagraph (B) as subparagraph (C) and 
by inserting after subparagraph (A) the following 
new subparagraph: 
‘‘(B) SPECIAL
RULE
FOR
IDENTIFIED 
STRADDLES.—For 
purposes 
of 
paragraph 
(2)(A)(ii), the unrecognized gain with respect to 
any identified offsetting position shall be the ex-
cess of the fair market value of the position at 
the time of the determination over the fair mar-
ket value of the position at the time the tax-
payer identified the position as a position in an 
identified straddle.’’. 
(4) 
CONFORMING
AMENDMENT.—Section 
1092(c)(2) is amended by striking subparagraph (B) 
and by redesignating subparagraph (C) as subpara-
graph (B). 
(b) PHYSICALLY
SETTLED
POSITIONS.—Section 
1092(d) (relating to definitions and special rules) is
397 
amended by adding at the end the following new para-
graph: 
‘‘(8) SPECIAL
RULES
FOR
PHYSICALLY
SET-
TLED POSITIONS.—For purposes of subsection (a), if 
a taxpayer settles a position which is part of a strad-
dle by delivering property to which the position re-
lates (and such position, if terminated, would result 
in a realization of a loss), then such taxpayer shall 
be treated as if such taxpayer— 
‘‘(A) terminated the position for its fair 
market value immediately before the settlement, 
and 
‘‘(B) sold the property so delivered by the 
taxpayer at its fair market value.’’. 
(c) REPEAL OF STOCK EXCEPTION.— 
(1) IN
GENERAL.—Paragraph (3) of section 
1092(d) (relating to definitions and special rules) is 
amended to read as follows: 
‘‘(3) SPECIAL
RULES
FOR
STOCK.—For pur-
poses of paragraph (1)— 
‘‘(A) IN
GENERAL.—The term ‘personal 
property’ includes— 
‘‘(i) any stock which is a part of a 
straddle at least 1 of the offsetting posi-
tions of which is a position with respect to
398 
such stock or substantially similar or re-
lated property, or 
‘‘(ii) any stock of a corporation 
formed or availed of to take positions in 
personal property which offset positions 
taken by any shareholder. 
‘‘(B) RULE FOR APPLICATION.—For pur-
poses of determining whether subsection (e) ap-
plies to any transaction with respect to stock 
described in subparagraph (A)(ii), all includible 
corporations of an affiliated group (within the 
meaning of section 1504(a)) shall be treated as 
1 taxpayer.’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
1258(d)(1) is amended by striking ‘‘; except that the 
term ‘personal property’ shall include stock’’. 
(d) HOLDING PERIOD FOR DIVIDEND EXCLUSION.— 
The last sentence of section 246(c) is amended by insert-
ing: ‘‘, other than a qualified covered call option to which 
section 1092(f) applies’’ before the period at the end. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to positions established on or after 
the date of the enactment of this Act.
399 
SEC. 688. ADDITION OF VACCINES AGAINST HEPATITIS A 
TO LIST OF TAXABLE VACCINES. 
(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. 689. ADDITION OF VACCINES AGAINST INFLUENZA TO 
LIST OF TAXABLE VACCINES. 
(a) IN GENERAL.—Section 4132(a)(1) (defining tax-
able vaccine), as amended by this Act, is amended by add-
ing at the end the following new subparagraph:
400 
‘‘(N) Any trivalent vaccine against influ-
enza.’’. 
(b) EFFECTIVE DATE.— 
(1) SALES, ETC.—The amendment made by this 
section shall apply to sales and uses on or after the 
later of— 
(A) the first day of the first month which 
begins more than 4 weeks after the date of the 
enactment of this Act, or 
(B) the date on which the Secretary of 
Health and Human Services lists any vaccine 
against influenza for purposes of compensation 
for any vaccine-related injury or death through 
the Vaccine Injury Compensation Trust Fund. 
(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. 690. EXTENSION OF IRS USER FEES. 
(a) IN GENERAL.—Section 7528(c) (relating to ter-
mination) is amended by striking ‘‘December 31, 2004’’ 
and inserting ‘‘September 30, 2014’’.
401 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to requests after the date of the 
enactment of this Act. 
SEC. 691. 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 performed 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-
402 
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 
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
403 
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 
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, 2014. 
‘‘(B)(i) Subject to clause (ii), Fees may not be 
charged under paragraphs (1) through (8) of subsection 
(a) after September 30, 2014. 
‘‘(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
404 
which the fee is charged under such paragraph, ex-
cept that in no case may the fee charged under any 
such paragraph exceed by more than 10 percent the 
amount otherwise prescribed by 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-
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.’’.
405 
(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); 
(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
406 
(3) any other recommendations with respect to 
the fees that the Secretary considers appropriate. 
TITLE VII—MARKET REFORM 
FOR TOBACCO GROWERS 
SEC. 701. SHORT TITLE. 
This title may be cited as the ‘‘Fair and Equitable 
Tobacco Reform Act of 2004’’. 
SEC. 702. EFFECTIVE DATE. 
This title and the amendments made by this title 
shall apply beginning with the 2005 marketing year of 
each kind of tobacco. 
Subtitle A—Termination of Federal 
Tobacco Quota and Price Sup-
port Programs 
SEC. 711. TERMINATION OF TOBACCO QUOTA PROGRAM 
AND RELATED PROVISIONS. 
(a) MARKETING QUOTAS.—Part I of subtitle B of 
title III of the Agricultural Adjustment Act of 1938 (7 
U.S.C. 1311 et seq.) is repealed. 
(b) PROCESSING.—Section 9(b) of the Agricultural 
Adjustment Act (7 U.S.C. 609(b)), reenacted with amend-
ments by the Agricultural Marketing Agreement Act of 
1937, is amended— 
(1) in paragraph (2), by striking ‘‘tobacco,’’; 
and
412 
(1) ASSESSMENTS
TO
COVER
OUTSTANDING 
LOAN COSTS.—The Commodity Credit Corporation 
shall impose and collect an assessment on the sale 
of 2005 and subsequent crops of each kind of to-
bacco and on the importation of tobacco in such 
amounts as may be necessary to obtain funds suffi-
cient to cover any losses incurred by the Corporation 
with respect to price support loans that— 
(A) were made for that kind of tobacco 
under section 106 of the Agricultural Act of 
1949 (7 U.S.C. 1445), before the repeal of such 
section by section 712 of this Act; and 
(B) remain outstanding on or after the 
date of the enactment of this Act. 
(2) 
ADMINISTRATION.—Assessments 
under 
paragraph (1) shall be administered in the manner 
provided for in section 106B of the Agricultural Act 
of 1949 (7 U.S.C. 1445–2), as in effect the day be-
fore the date of the enactment of this Act. To cover 
the costs of administering such assessments, the 
Commodity Credit Corporation shall use funds re-
maining in the No Net Cost Tobacco Funds and No 
Net Cost Tobacco Accounts established pursuant to 
sections 106A and 106B of the Agricultural Act of 
1949 (7 U.S.C. 1445–1, 1445–2).