I 
108TH CONGRESS 
1ST SESSION H. R. 1308
To amend the Internal Revenue Code of 1986 to end certain abusive tax 
practices, to provide tax relief and simplification, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
MARCH 18, 2003
Mr. THOMAS 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 end certain 
abusive tax practices, to provide tax relief and simplifica-
tion, 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; 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 indi-
vidual—
‘‘(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 181⁄2, 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 indi-
vidual—
‘‘(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 identi-
fied— 
‘‘(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-
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 
(D) requires an increasing level of con-
servation benefits to be provided whenever cir-
cumstances allow it. 
(3) 
QUALIFIED
ORGANIZATION.—The 
term 
‘‘qualified organization’’ means an organization—
(A) which is a nonprofit organization orga-
nized and operated exclusively for charitable, 
scientific, or educational purposes including but 
not limited to acquiring, protecting, restoring, 
managing, and developing forest lands and 
other renewable resources for the long-term 
charitable, educational, scientific, and public 
benefit of the State of Washington,
(B) more than half of the value of the 
property of which consists of forests and forest 
land acquired with the proceeds from qualified 
forest conservation bonds, 
(C) which periodically conducts educational 
programs designed to inform the public of envi-
ronmentally sensitive forestry management and 
conservation techniques, 
(D) which has a board of directors that at 
all times is comprised of 9 members—
(i) at least 2 of whom represent the 
holders of the conservation restriction de-
scribed in paragraph (2), and 
(ii) at least 2 of whom are public offi-
cials, 
(E) of which not more than one-third of 
the members of the board of directors is com-
prised of individuals who are or were at any 
time within 5 years before the beginning of a 
term of membership on the board, an employee 
of, independent contractor with respect to, offi-
cer of, director of, or held a material financial 
interest in, a commercial forest products enter-
prise with which the Evergreen Forest Trust
has a contractual or other financial arrange-
ment, 
(F) the bylaws of which require at least 
two-thirds of the members of the board of direc-
tors to vote affirmatively to approve the quali-
fied conservation program and any change 
thereto, and 
(G) upon dissolution, is required to dedi-
cate its assets to—
(i) an organization described in sec-
tion 501(c)(3) of such Code which is orga-
nized and operated for conservation pur-
poses, or 
(ii) a governmental unit described in 
section 170(c)(1) of such Code. 
(4) EVERGREEN
FOREST
TRUST.—The term 
‘‘Evergreen Forest Trust’’ means a nonprofit cor-
poration known as the Evergreen Forest Trust 
which was incorporated on February 25, 2000, 
under chapter 24.03 of the Revised Code of Wash-
ington and which, on May 11, 2001, was recognized 
as an organization described in section 501(c)(3) of 
the Internal Revenue Code of 1986.
(5) UNRELATED
PERSON.—The term ‘‘unre-
lated person’’ means a person who is not a related 
person. 
(6) RELATED
PERSON.—A person shall be 
treated as related to another person if—
(A) such person bears a relationship to 
such other person described in section 267(b) 
(determined without regard to paragraph (9) 
thereof), or 707(b)(1), of such Code, deter-
mined by substituting ‘‘25 percent’’ for ‘‘50 
percent’’ each place it occurs therein, and 
(B) in the case such other person is a non-
profit organization, if such person controls di-
rectly or indirectly more than 25 percent of the 
governing body of such organization. 
TITLE V—RELIEF AND EQUITY 
FOR SMALL BUSINESSES 
SEC. 501. SIMPLIFICATION OF EXCISE TAX IMPOSED ON 
BOWS AND ARROWS. 
(a) BOWS.—Paragraph (1) of section 4161(b) (relat-
ing to bows) is amended to read as follows: 
‘‘(1) BOWS.—
‘‘(A) IN GENERAL.—There is hereby im-
posed on the sale by the manufacturer, pro-
ducer, or importer of any bow which has a draw
weight of 30 pounds or more, a tax equal to 11 
percent of the price for which so sold. 
‘‘(B) ARCHERY
EQUIPMENT.—There is 
hereby imposed on the sale by the manufac-
turer, producer, or importer—
‘‘(i) of any part or accessory suitable 
for inclusion in or attachment to a bow de-
scribed in subparagraph (A), and 
‘‘(ii) of any quiver or broadhead suit-
able for use with an arrow described in 
paragraph (3), 
a tax equal to 11 percent of the price for which 
so sold.’’. 
(b) ARROWS.—Subsection (b) of section 4161 (relat-
ing to bows and arrows, etc.) is amended by redesignating 
paragraph (3) as paragraph (4) and inserting after para-
graph (2) the following: 
‘‘(3) ARROWS.—
‘‘(A) IN GENERAL.—There is hereby im-
posed on the sale by the manufacturer, pro-
ducer, or importer of any arrow, a tax equal to 
12 percent of the price for which so sold. 
‘‘(B) EXCEPTION.—The tax imposed by 
subparagraph (A) on an arrow shall not apply
if the arrow contains an arrow shaft sub-
ject to the tax imposed by paragraph (2). 
‘‘(C) ARROW.—For purposes of this para-
graph, the term ‘arrow’ means any shaft de-
scribed in paragraph (2) to which additional 
components are attached.’’. 
(c) CONFORMING AMENDMENT.—The heading of sec-
tion 4161(b)(2) is amended by striking ‘‘ARROWS.—’’ and 
inserting ‘‘ARROW COMPONENTS.—’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to articles sold by the manufac-
turer, producer, or importer after the 90th day after the 
date of the enactment of this Act. 
SEC. 502. CAPITAL GAIN TREATMENT UNDER SECTION 
631(b) TO APPLY TO OUTRIGHT SALES BY 
LANDOWNERS. 
(a) IN GENERAL.—The first sentence of section 
631(b) (relating to disposal of timber with a retained eco-
nomic interest) is amended by striking ‘‘retains an eco-
nomic interest in such timber’’ and inserting ‘‘either re-
tains an economic interest in such timber or makes an 
outright sale of such timber’’. 
(b) CONFORMING AMENDMENTS.—
(1) The third sentence of section 631(b) is 
amended by striking ‘‘The date of disposal’’ and in-
serting ‘‘In the case of disposal of timber with a re-
tained economic interest, the date of disposal’’. 
(2) The heading for section 631(b) is amended 
by striking ‘‘WITH A RETAINED ECONOMIC INTER-
EST’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to sales after the date of the enact-
ment of this Act. 
SEC. 503. REPEAL OF EXCISE TAX ON FISHING TACKLE 
BOXES. 
(a) REPEAL.—Paragraph (6) of section 4162(a) (de-
fining sport fishing equipment) is amended by striking 
subparagraph (C) and by redesignating subparagraphs 
(D) through (J) as subparagraphs (C) through (I), respec-
tively. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall take effect 30 days after the date of the 
enactment of this Act. 
SEC. 504. TREATMENT UNDER AT-RISK RULES OF PUBLICLY 
TRADED NONRECOURSE DEBT. 
(a) IN GENERAL.—Subparagraph (A) of section 
465(b)(6) (relating to qualified nonrecourse financing 
treated as amount at risk) is amended by striking ‘‘share 
of’’ and all that follows and inserting ‘‘share of—
‘‘(i) any qualified nonrecourse financ-
ing which is secured by real property used 
in such activity, and 
‘‘(ii) any other financing which—
‘‘(I) would (but for subparagraph 
(B)(ii)) be qualified nonrecourse fi-
nancing, 
‘‘(II) is qualified publicly traded 
debt, and 
‘‘(III) is not borrowed by the tax-
payer from a person described in sub-
clause (I), (II), or (III) of section 
49(a)(1)(D)(iv).’’. 
(b) QUALIFIED PUBLICLY TRADED DEBT.—Para-
graph (6) of section 465(b) is amended by adding at the 
end the following new subparagraph: 
‘‘(F) 
QUALIFIED
PUBLICLY
TRADED 
DEBT.—For purposes of subparagraph (A), the 
term ‘qualified publicly traded debt’ means any 
debt instrument which is readily tradable on an 
established securities market. Such term shall 
not include any debt instrument which has a 
yield to maturity which equals or exceeds the 
limitation in section 163(i)(1)(B).’’.
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to debt instruments issued after 
the date of the enactment of this Act. 
TITLE VI—EQUITY FOR 
FARMERS 
SEC. 601. SPECIAL RULES FOR LIVESTOCK SOLD ON AC-
COUNT OF WEATHER-RELATED CONDITIONS. 
(a) RULES FOR REPLACEMENT OF INVOLUNTARILY 
CONVERTED LIVESTOCK.—Subsection (e) of section 1033 
(relating to involuntary conversions) is amended—
(1) by striking ‘‘CONDITIONS.—For purposes’’ 
and inserting ‘‘CONDITIONS.—
‘‘(1) IN GENERAL.—For purposes’’, and 
(2) by adding at the end the following new 
paragraph: 
‘‘(2) EXTENSION OF REPLACEMENT PERIOD.—
‘‘(A) 
IN
GENERAL.—In 
the 
case 
of 
drought, flood, or other weather-related condi-
tions described in paragraph (1) which result in 
the area being designated as eligible for assist-
ance by the Federal Government, subsection 
(a)(2)(B) shall be applied with respect to any 
converted property by substituting ‘4 years’ for 
‘2 years’.
‘‘(B) 
FURTHER
EXTENSION
BY
SEC-
RETARY.—The Secretary may extend on a re-
gional basis the period for replacement under 
this section (after the application of subpara-
graph (A)) for such additional time as the Sec-
retary determines appropriate if the weather-re-
lated conditions which resulted in such applica-
tion continue for more than 3 years.’’. 
(b) INCOME INCLUSION RULES.—Subsection (e) of 
section 451 (relating to special rule for proceeds from live-
stock sold on account of drought, flood, or other weather-
related conditions) is amended by adding at the end the 
following new paragraph: 
‘‘(3) SPECIAL
ELECTION
RULES.—If section 
1033(e)(2) applies to a sale or exchange of livestock 
described in paragraph (1), the election under para-
graph (1) shall be deemed valid if made during the 
replacement period described in such section.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any taxable year with respect 
to which the due date (without regard to extensions) for 
the return is after December 31, 2002.
SEC. 602. INCOME AVERAGING FOR FARMERS NOT TO IN-
CREASE ALTERNATIVE MINIMUM TAX. 
(a) IN GENERAL.—Subsection (c) of section 55 (de-
fining regular tax) is amended by redesignating paragraph 
(2) as paragraph (3) and by inserting after paragraph (1) 
the following new paragraph: 
‘‘(2) COORDINATION WITH INCOME AVERAGING 
FOR FARMERS.—Solely for purposes of this section, 
section 1301 (relating to averaging of farm income) 
shall not apply in computing the regular tax liabil-
ity.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
December 31, 2002. 
SEC. 603. PAYMENT OF DIVIDENDS ON STOCK OF COOPERA-
TIVES 
WITHOUT 
REDUCING 
PATRONAGE 
DIVIDENDS. 
(a) IN GENERAL.—Subsection (a) of section 1388 
(relating to patronage dividend defined) is amended by 
adding at the end the following: ‘‘For purposes of para-
graph (3), net earnings shall not be reduced by amounts 
paid during the year as dividends on capital stock or other 
proprietary capital interests of the organization to the ex-
tent that the articles of incorporation or bylaws of such 
organization or other contract with patrons provide that 
such dividends are in addition to amounts otherwise pay-
able to patrons which are derived from business done with 
or for patrons during the taxable year.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
this section shall apply to distributions in taxable years 
beginning after the date of the enactment of this Act. 
TITLE VII—PROTECTION OF 
SOCIAL SECURITY 
SEC. 701. PROTECTION OF SOCIAL SECURITY. 
The amounts transferred to any trust fund under 
title II of the Social Security Act shall be determined as 
if this Act (other than title I, section 301, and this section) 
had not been enacted.
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