113
(A) in paragraph (2), by striking ‘‘and 
(l)(5)’’, and 
(B) in paragraph (3), by striking ‘‘or (5)’’. 
(6) Section 9503(c)(7) is amended—
(A) by amending subparagraphs (A) and 
(B) to read as follows: 
‘‘(A) 4.3 cents per gallon of kerosene subject 
to section 6427(l)(4)(A) with respect to which a 
payment has been made by the Secretary under 
section 6427(l), and 
‘‘(B) 21.8 cents per gallon of kerosene sub-
ject to section 6427(l)(4)(B) with respect to 
which a payment has been made by the Sec-
retary under section 6427(l).’’, and 
(B) in the matter following subparagraph 
(B), by striking ‘‘or (5)’’. 
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by 
this section shall apply to kerosene sold after Sep-
tember 30, 2005. 
(2) SPECIAL RULE FOR PENDING CLAIMS.—In 
the case of kerosene sold for use in aviation (other 
than kerosene to which section 6427(l)(4)(C)(ii) of the 
Internal Revenue Code of 1986 (as added by sub-
section (a)) applies or kerosene to which section
114
6427(l)(5) of such Code (as redesignated by subsection 
(b)) applies) after September 30, 2005, and before the 
date of the enactment of this Act, the ultimate pur-
chaser shall be treated as having waived the right to 
payment under section 6427(l)(1) of such Code and as 
having assigned such right to the ultimate vendor if 
such ultimate vendor has met the requirements of sub-
paragraph (A), (B), or (D) of section 6416(a)(1) of 
such Code. 
(d) SPECIAL RULE FOR KEROSENE USED IN AVIATION 
ON A FARM FOR FARMING PURPOSES.—
(1) REFUNDS FOR PURCHASES AFTER DECEMBER 
31, 2004, AND BEFORE OCTOBER 1, 2005.—The Sec-
retary of the Treasury shall pay to the ultimate pur-
chaser of any kerosene which is used in aviation on 
a farm for farming purposes and which was pur-
chased after December 31, 2004, and before October 1, 
2005, an amount equal to the aggregate amount of 
tax imposed on such fuel under section 4041 or 4081 
of the Internal Revenue Code of 1986, as the case may 
be, reduced by any payment to the ultimate vendor 
under section 6427(l)(5)(C) of such Code (as in effect 
on the day before the date of the enactment of the 
Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: a Legacy for Users).
115
(2) USE ON A FARM FOR FARMING PURPOSES.—
For purposes of paragraph (1), kerosene shall be 
treated as used on a farm for farming purposes if 
such kerosene is used for farming purposes (within 
the meaning of section 6420(c)(3) of the Internal Rev-
enue Code of 1986) in carrying on a trade or business 
on a farm situated in the United States. For purposes 
of the preceding sentence, rules similar to the rules of 
section 6420(c)(4) of such Code shall apply. 
(3) TIME FOR FILING CLAIMS.—No claim shall 
be allowed under paragraph (1) unless the ultimate 
purchaser files such claim before the date that is 3 
months after the date of the enactment of this Act. 
(4) NO DOUBLE BENEFIT.—No amount shall be 
paid under paragraph (1) or section 6427(l) of the 
Internal Revenue Code of 1986 with respect to any 
kerosene described in paragraph (1) to the extent that 
such amount is in excess of the tax imposed on such 
kerosene under section 4041 or 4081 of such Code, as 
the case may be. 
(5) APPLICABLE
LAWS.—For purposes of this 
subsection, rules similar to the rules of section 6427(j) 
of the Internal Revenue Code of 1986 shall apply.
116
SEC. 421. REGIONAL INCOME TAX AGENCIES TREATED AS 
STATES 
FOR 
PURPOSES 
OF 
CONFIDEN-
TIALITY AND DISCLOSURE REQUIREMENTS. 
(a) IN GENERAL.—Paragraph (5) of section 6103(b) 
is amended to read as follows: 
‘‘(5) STATE.—
‘‘(A) 
IN
GENERAL.—The 
term 
‘State’ 
means—
‘‘(i) any of the 50 States, the District 
of Columbia, the Commonwealth of Puerto 
Rico, the Virgin Islands, the Canal Zone, 
Guam, American Samoa, and the Common-
wealth of the Northern Mariana Islands, 
‘‘(ii) for purposes of subsections (a)(2), 
(b)(4), (d)(1), (h)(4), and (p), any munici-
pality—
‘‘(I) with a population in excess 
of 250,000 (as determined under the 
most recent decennial United States 
census data available), 
‘‘(II) which imposes a tax on in-
come or wages, and 
‘‘(III) with which the Secretary 
(in his sole discretion) has entered into 
an agreement regarding disclosure, and
117
‘‘(iii) 
for 
purposes 
of 
subsections 
(a)(2), (b)(4), (d)(1), (h)(4), and (p), any 
governmental entity—
‘‘(I) which is formed and operated 
by a qualified group of municipalities, 
and 
‘‘(II) with which the Secretary (in 
his sole discretion) has entered into an 
agreement regarding disclosure. 
‘‘(B) REGIONAL INCOME TAX AGENCIES.—
For purposes of subparagraph (A)(iii)—
‘‘(i) QUALIFIED
GROUP
OF
MUNICI-
PALITIES.—The term ‘qualified group of 
municipalities’ means, with respect to any 
governmental entity, 2 or more municipali-
ties—
‘‘(I) each of which imposes a tax 
on income or wages, 
‘‘(II) each of which, under the au-
thority of a State statute, administers 
the laws relating to the imposition of 
such taxes through such entity, and 
‘‘(III) which collectively have a 
population in excess of 250,000 (as de-
termined under the most recent decen-
118
nial United States census data avail-
able). 
‘‘(ii) REFERENCES
TO
STATE
LAW, 
ETC.—For purposes of applying subpara-
graph (A)(iii) to the subsections referred to 
in such subparagraph, any reference in such 
subsections to State law, proceedings, or tax 
returns shall be treated as references to the 
law, proceedings, or tax returns, as the case 
may be, of the municipalities which form 
and operate the governmental entity re-
ferred to in such subparagraph. 
‘‘(iii) DISCLOSURE
TO
CONTRACTORS 
AND OTHER AGENTS.—Notwithstanding any 
other provision of this section, no return or 
return information shall be disclosed to any 
contractor or other agent of a governmental 
entity referred to in subparagraph (A)(iii) 
unless such entity, to the satisfaction of the 
Secretary—
‘‘(I) has requirements in effect 
which require each such contractor or 
other agent which would have access to 
returns or return information to pro-
vide safeguards (within the meaning of
119
subsection (p)(4)) to protect the con-
fidentiality of such returns or return 
information, 
‘‘(II) agrees to conduct an on-site 
review every 3 years (or a mid-point 
review in the case of contracts or agree-
ments of less than 3 years in duration) 
of each contractor or other agent to de-
termine compliance with such require-
ments, 
‘‘(III) submits the findings of the 
most recent review conducted under 
subclause (II) to the Secretary as part 
of the report required by subsection 
(p)(4)(E), and 
‘‘(IV) certifies to the Secretary for 
the most recent annual period that 
such contractor or other agent is in 
compliance with all such requirements. 
The certification required by subclause (IV) 
shall include the name and address of each 
contractor and other agent, a description of 
the contract or agreement with such con-
tractor or other agent, and the duration of 
such contract or agreement. The require-
120
ments of this clause shall not apply to dis-
closures pursuant to subsection (n) for pur-
poses of Federal tax administration and a 
rule similar to the rule of subsection 
(p)(8)(B) shall apply for purposes of this 
clause.’’. 
(b) SPECIAL RULES FOR DISCLOSURE.—Subsection 
(d) of section 6103 is amended by adding at the end the 
following new paragraph: 
‘‘(6) LIMITATION
ON
DISCLOSURE
REGARDING 
REGIONAL
INCOME
TAX
AGENCIES
TREATED
AS 
STATES.—For purposes of paragraph (1), inspection 
by or disclosure to an entity described in subsection 
(b)(5)(A)(iii) shall be for the purpose of, and only to 
the extent necessary in, the administration of the laws 
of the member municipalities in such entity relating 
to the imposition of a tax on income or wages. Such 
entity may not redisclose any return or return infor-
mation received pursuant to paragraph (1) to any 
such member municipality.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to disclosures made after December 31, 
2006.
121
SEC. 422. DESIGNATION OF WINES BY SEMI-GENERIC 
NAMES. 
(a) IN GENERAL.—Subsection (c) of section 5388 (re-
lating to use of semi-generic designations) is amended by 
adding at the end the following new paragraph: 
‘‘(3) SPECIAL RULE FOR USE OF CERTAIN SEMI-
GENERIC DESIGNATIONS.—
‘‘(A) IN GENERAL.—In the case of any wine 
to which this paragraph applies—
‘‘(i) paragraph (1) shall not apply, 
‘‘(ii) in the case of wine of the Euro-
pean Community, designations referred to 
in subparagraph (C)(i) may be used for 
such wine only if the requirement of sub-
paragraph (B)(ii) is met, and 
‘‘(iii) in the case any other wine bear-
ing a brand name, or brand name and fan-
ciful name, semi-generic designations may 
be used for such wine only if the require-
ments of clauses (i), (ii), and (iii) of sub-
paragraph (B) are met. 
‘‘(B) REQUIREMENTS.—
‘‘(i) The requirement of this clause is 
met if there appears in direct conjunction 
with the semi-generic designation an appro-
122
priate appellation of origin disclosing the 
origin of the wine. 
‘‘(ii) The requirement of this clause is 
met if the wine conforms to the standard of 
identity, if any, for such wine contained in 
the regulations under this section or, if 
there is no such standard, to the trade un-
derstanding of such class or type. 
‘‘(iii) The requirement of this clause is 
met if the person, or its successor in inter-
est, using the semi-generic designation held 
a Certificate of Label Approval or Certifi-
cate of Exemption from Label Approval 
issued by the Secretary for a wine label 
bearing such brand name, or brand name 
and fanciful name, before March 10, 2006, 
on which such semi-generic designation ap-
peared. 
‘‘(C) WINES
TO
WHICH
PARAGRAPH
AP-
PLIES.—
‘‘(i) IN GENERAL.—Except as provided 
in clause (ii), this paragraph shall apply to 
any grape wine which is designated as Bur-
gundy, Claret, Chablis, Champagne, Chi-
anti, Malaga, Marsala, Madeira, Moselle,
123
Port, Retsina, Rhine Wine or Hock, Sau-
terne, Haut Sauterne, Sherry, or Tokay. 
‘‘(ii) 
EXCEPTION.—This 
paragraph 
shall not apply to wine which—
‘‘(I) contains less than 7 percent 
or more than 24 percent alcohol by vol-
ume, 
‘‘(II) is intended for sale outside 
the United States, or 
‘‘(III) does not bear a brand 
name.’’. 
(b) EFFECTIVE DATE.—The amendments made by this 
section shall apply to wine imported or bottled in the 
United States on or after the date of enactment of this Act. 
SEC. 423. MODIFICATION OF RAILROAD TRACK MAINTE-
NANCE CREDIT. 
(a) IN GENERAL.—Section 45G(d) (defining qualified 
railroad track maintenance expenditures) is amended—
(1) by inserting ‘‘gross’’ after ‘‘means’’, and 
(2) by inserting ‘‘(determined without regard to 
any consideration for such expenditures given by the 
Class II or Class III railroad which made the assign-
ment of such track)’’ after ‘‘Class II or Class III rail-
road’’.
124
(b) EFFECTIVE DATE.—The amendment made by this 
section shall take effect as if included in the amendment 
made by section 245(a) of the American Jobs Creation Act 
of 2004. 
SEC. 424. MODIFICATION OF EXCISE TAX ON UNRELATED 
BUSINESS TAXABLE INCOME OF CHARITABLE 
REMAINDER TRUSTS. 
(a) IN GENERAL.—Subsection (c) of section 664 (relat-
ing to exemption from income taxes) is amended to read 
as follows: 
‘‘(c) TAXATION OF TRUSTS.—
‘‘(1) INCOME TAX.—A charitable remainder an-
nuity trust and a charitable remainder unitrust shall, 
for any taxable year, not be subject to any tax im-
posed by this subtitle. 
‘‘(2) EXCISE TAX.—
‘‘(A) IN GENERAL.—In the case of a chari-
table remainder annuity trust or a charitable re-
mainder unitrust which has unrelated business 
taxable income (within the meaning of section 
512, determined as if part III of subchapter F 
applied to such trust) for a taxable year, there 
is hereby imposed on such trust or unitrust an 
excise tax equal to the amount of such unrelated 
business taxable income.
125
‘‘(B) CERTAIN RULES TO APPLY.—The tax 
imposed by subparagraph (A) shall be treated as 
imposed by chapter 42 for purposes of this title 
other than subchapter E of chapter 42. 
‘‘(C) TAX COURT PROCEEDINGS.—For pur-
poses of this paragraph, the references in section 
6212(c)(1) to section 4940 shall be deemed to in-
clude references to this paragraph.’’. 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2006. 
SEC. 425. LOANS TO QUALIFIED CONTINUING CARE FACILI-
TIES MADE PERMANENT. 
(a) IN GENERAL.—Subsection (h) of section 7872 (re-
lating to exception for loans to qualified continuing care 
facilities) is amended by striking paragraph (4). 
(b) EFFECTIVE DATE.—The amendment made by this 
section shall take effect as if included in section 209 of the 
Tax Increase Prevention and Reconciliation Act of 2005. 
SEC. 426. TECHNICAL CORRECTIONS. 
(a) TECHNICAL CORRECTION RELATING
TO LOOK-
THROUGH TREATMENT OF PAYMENTS BETWEEN RELATED 
CONTROLLED FOREIGN CORPORATIONS UNDER THE FOR-
EIGN PERSONAL HOLDING COMPANY RULES.—
(1) IN GENERAL.—
126
(A) 
The 
first 
sentence 
of 
section 
954(c)(6)(A) is amended by striking ‘‘which is 
not subpart F income’’ and inserting ‘‘which is 
neither subpart F income nor income treated as 
effectively connected with the conduct of a trade 
or business in the United States’’. 
(B) Section 954(c)(6)(A) is amended by 
striking the last sentence and inserting the fol-
lowing: ‘‘The Secretary shall prescribe such regu-
lations as may be necessary or appropriate to 
carry out this paragraph, including such regula-
tions as may be necessary or appropriate to pre-
vent the abuse of the purposes of this para-
graph.’’
(2) EFFECTIVE DATE.—The amendments made 
by this subsection shall take effect as if included in 
section 103(b) of the Tax Increase Prevention and 
Reconciliation Act of 2005. 
(b) TECHNICAL CORRECTION REGARDING AUTHORITY 
TO EXERCISE REASONABLE CAUSE AND GOOD FAITH EX-
CEPTION.—
(1) IN GENERAL.—Section 903(d)(2)(B)(iii) of 
the American Jobs Creation Act of 2004, as amended 
by section 303(a) of the Gulf Opportunity Zone Act
127
of 2005, is amended by inserting ‘‘or the Secretary’s 
delegate’’ after ‘‘the Secretary of the Treasury’’. 
(2) EFFECTIVE DATE.—The amendment made by 
this subsection shall take effect as if included in the 
provisions of the American Jobs Creation Act of 2004 
to which it relates. 
DIVISION B—MEDICARE AND 
OTHER HEALTH PROVISIONS 
SEC. 1. SHORT TITLE OF DIVISION. 
This division may be cited as the ‘‘Medicare Improve-
ments and Extension Act of 2006’’. 
TITLE I—MEDICARE IMPROVED 
QUALITY AND PROVIDER PAY-
MENTS 
SEC. 101. PHYSICIAN PAYMENT AND QUALITY IMPROVE-
MENT. 
(a) ONE-YEAR INCREASE IN MEDICARE PHYSICIAN 
FEE SCHEDULE CONVERSION FACTOR.—Section 1848(d) of 
the Social Security Act (42 U.S.C. 1395w-4(d)) is amended 
by adding at the end the following new paragraph: 
‘‘(7) CONVERSION FACTOR FOR 2007.—
‘‘(A) IN GENERAL.—The conversion factor 
that would otherwise be applicable under this 
subsection for 2007 shall be the amount of such 
conversion factor divided by the product of—
128
‘‘(i) 1 plus the Secretary’s estimate of 
the percentage increase in the MEI (as de-
fined in section 1842(i)(3)) for 2007 (di-
vided by 100); and 
‘‘(ii) 1 plus the Secretary’s estimate of 
the update adjustment factor under para-
graph (4)(B) for 2007. 
‘‘(B) NO EFFECT ON COMPUTATION OF CON-
VERSION FACTOR FOR 2008.—The conversion fac-
tor under this subsection shall be computed 
under paragraph (1)(A) for 2008 as if subpara-
graph (A) had never applied.’’. 
(b) QUALITY REPORTING SYSTEM.—Section 1848 of 
the Social Security Act (42 U.S.C. 1395w-4) is amended 
by adding at the end the following new subsection: 
‘‘(k) QUALITY REPORTING SYSTEM.—
‘‘(1) IN GENERAL.—The Secretary shall imple-
ment a system for the reporting by eligible profes-
sionals of data on quality measures specified under 
paragraph (2). Such data shall be submitted in a 
form and manner specified by the Secretary (by pro-
gram instruction or otherwise), which may include 
submission of such data on claims under this part. 
‘‘(2) USE OF CONSENSUS-BASED QUALITY MEAS-
URES.—
129
‘‘(A) FOR 2007.—
‘‘(i) IN GENERAL.—For purposes of ap-
plying this subsection for the reporting of 
data on quality measures for covered profes-
sional services furnished during the period 
beginning July 1, 2007, and ending Decem-
ber 31, 2007, the quality measures specified 
under this paragraph are the measures 
identified as 2007 physician quality meas-
ures under the Physician Voluntary Report-
ing Program as published on the public 
website of the Centers for Medicare & Med-
icaid Services as of the date of the enact-
ment of this subsection, except as may be 
changed by the Secretary based on the re-
sults of a consensus-based process in Janu-
ary of 2007, if such change is published on 
such website by not later than April 1, 
2007. 
‘‘(ii) SUBSEQUENT
REFINEMENTS
IN 
APPLICATION
PERMITTED.—The Secretary 
may, from time to time (but not later than 
July 1, 2007), publish on such website 
(without notice or opportunity for public 
comment) 
modifications 
or 
refinements