102
chapter 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 unre-
lated business taxable income.
‘‘(B) CERTAIN
RULES
TO
APPLY.—
The tax imposed by subparagraph (A)
shall be treated as imposed by chap-
ter 42 for purposes of this title other
than subchapter E of chapter 42.
‘‘(C) CHARACTER OF DISTRIBUTIONS
AND COORDINATION WITH DISTRIBUTION
REQUIREMENTS.—The amounts taken
into account in determining unre-
lated business taxable income (as de-
fined in subparagraph (A)) shall not
be taken into account for purposes
of—
‘‘(i) subsection (b),
‘‘(ii) determining the value of
trust 
assets 
under 
subsection
(d)(2), and
‘‘(iii) 
determining 
income
under subsection (d)(3).
103
‘‘(D) TAX COURT PROCEEDINGS.—For
purposes of this paragraph, the ref-
erences in section 6212(c)(1) to sec-
tion 4940 shall be deemed to include
references to this paragraph.’’.
(b) EFFECTIVE
DATE.—The amendment
made by subsection (a) shall apply to taxable
years beginning after December 31, 2001.
SEC. 108. EXPANSION OF CHARITABLE CONTRIBUTION AL-
LOWED FOR SCIENTIFIC PROPERTY USED
FOR RESEARCH AND FOR COMPUTER TECH-
NOLOGY AND EQUIPMENT USED FOR EDU-
CATIONAL PURPOSES.
(a) SCIENTIFIC PROPERTY USED
FOR RE-
SEARCH.—Clause (ii) of section 170(e)(4)(B) of
the Internal Revenue Code of 1986 (defining
qualified research contributions) is amended
by inserting ‘‘or assembled’’ after ‘‘con-
structed’’.
(b) COMPUTER TECHNOLOGY AND EQUIPMENT
FOR EDUCATIONAL PURPOSES.—Clause (ii) of
section 170(e)(6)(B) of such Code is amended
by inserting ‘‘or assembled’’ after ‘‘con-
structed’’ and ‘‘or assembling’’ after ‘‘construc-
tion’’.
104
(c) CONFORMING
AMENDMENT.—Subpara-
graph (D) of section 170(e)(6) of such Code is
amended by inserting ‘‘or assembled’’ after
‘‘constructed’’ and ‘‘or assembling’’ after ‘‘con-
struction’’.
(d) EFFECTIVE
DATE.—The amendments
made by this section shall apply to taxable
years beginning after December 31, 2001.
SEC. 109. ADJUSTMENT TO BASIS OF S CORPORATION
STOCK 
FOR 
CERTAIN 
CHARITABLE 
CON-
TRIBUTIONS.
(a) IN GENERAL.—Paragraph (1) of section
1367(a) of such Code (relating to adjustments
to basis of stock of shareholders, etc.) is
amended by striking ‘‘and’’ at the end of sub-
paragraph (B), by striking the period at the
end of subparagraph (C) and inserting ‘‘, and’’,
and by adding at the end the following new
subparagraph:
‘‘(D) the excess of the amount of
the shareholder’s deduction for any
charitable contribution made by the
S corporation over the shareholder’s
proportionate share of the adjusted
basis of the property contributed.’’.
105
(b) EFFECTIVE
DATE.—The amendment
made by this section shall apply to taxable
years beginning after December 31, 2001.
TITLE II—EXPANSION OF
CHARITABLE CHOICE
SEC. 201. PROVISION OF ASSISTANCE UNDER GOVERN-
MENT PROGRAMS BY RELIGIOUS AND COM-
MUNITY ORGANIZATIONS.
Title XXIV of the Revised Statutes is
amended by inserting after section 1990 (42
U.S.C. 1994) the following:
‘‘SEC. 1994A. CHARITABLE CHOICE.
‘‘(a) SHORT TITLE.—This section may be
cited as the ‘Charitable Choice Act of 2001’.
‘‘(b) PURPOSES.—The purposes of this sec-
tion are—
‘‘(1) to provide assistance to individ-
uals and families in need in the most ef-
fective and efficient manner;
‘‘(2) to prohibit discrimination against
religious organizations on the basis of re-
ligion in the administration and distribu-
tion of government assistance under the
government programs described in sub-
section (c)(4);
106
‘‘(3) to allow religious organizations
to assist in the administration and dis-
tribution of such assistance without im-
pairing the religious character of such
organizations; and
‘‘(4) to protect the religious freedom
of individuals and families in need who
are eligible for government assistance, in-
cluding 
expanding 
the 
possibility 
of
choosing to receive services from a reli-
gious organization providing such assist-
ance.
‘‘(c) RELIGIOUS ORGANIZATIONS INCLUDED AS
NON-GOVERNMENTAL PROVIDERS.—
‘‘(1) IN GENERAL.—
‘‘(A) INCLUSION.—For any program
described in paragraph (4) that is car-
ried out by the Federal Government,
or by a State or local government
with Federal funds, the government
shall consider, on the same basis as
other 
nongovernmental 
organiza-
tions, religious organizations to pro-
vide the assistance under the pro-
gram, if the program is implemented
107
in a manner that is consistent with
the Establishment Clause and the
Free Exercise Clause of the first
amendment to the Constitution.
‘‘(B) DISCRIMINATION PROHIBITED.—
Neither the Federal Government nor
a State or local government receiving
funds under a program described in
paragraph 
(4) 
shall 
discriminate
against an organization that provides
assistance under, or applies to pro-
vide assistance under, such program,
on the basis that the organization has
a religious character.
‘‘(2) FUNDS NOT AID TO RELIGION.—Fed-
eral, State, or local government funds or
other assistance that is received by a reli-
gious organization for the provision of
services under this section constitutes
aid to individuals and families in need,
the ultimate beneficiaries of such serv-
ices, and not aid to the religious organi-
zation.
‘‘(3) FUNDS NOT ENDORSEMENT OF RELI-
GION.—The receipt by a religious organi-
108
zation of Federal, State, or local govern-
ment funds or other assistance under this
section is not and should not be per-
ceived as an endorsement by the govern-
ment of religion or the organization’s re-
ligious beliefs or practices.
‘‘(4) PROGRAMS.—For purposes of this
section, a program is described in this
paragraph—
‘‘(A) if it involves activities car-
ried out using Federal funds—
‘‘(i) related to the prevention
and treatment of juvenile delin-
quency and the improvement of
the juvenile justice system, in-
cluding programs funded under
the Juvenile Justice and Delin-
quency Prevention Act of 1974 (42
U.S.C. 5601 et seq.);
‘‘(ii) related to the prevention
of 
crime, 
including 
programs
funded under title I of the Omni-
bus 
Crime 
Control 
and 
Safe
Streets Act of 1968 (42 U.S.C. 3701
et seq.);
109
‘‘(iii) under the Federal hous-
ing laws;
‘‘(iv) under title I of the Work-
force Investment Act of 1998 (29
U.S.C. 2801 et seq.)
‘‘(v) under the Older Ameri-
cans Act of 1965 (42 U.S.C. 3001 et
seq.);
‘‘(vi) under the Child Care De-
velopment Block Grant Act of
1990 (42 U.S.C. 9858 et seq.);
‘‘(vii) under the Community
Development Block Grant Pro-
gram established under title I of
the Housing and Community De-
velopment Act of 1974 (42 U.S.C.
5301 et seq.);
‘‘(viii) related to the interven-
tion in and prevention of domes-
tic violence;
‘‘(ix) related to hunger relief
activities; or
‘‘(x) under the Job Access and
Reverse Commute grant program
established under section 3037 of
110
the Federal Transit Act of 1998
(49 U.S.C. 5309 note); or
‘‘(B)(i) if it involves activities to
assist students in obtaining the recog-
nized equivalents of secondary school
diplomas and activities relating to
non-school-hours programs; and
‘‘(ii) except as provided in sub-
paragraph (A) and clause (i), does not
include activities carried out under
Federal 
programs 
providing 
edu-
cation to children eligible to attend
elementary 
schools 
or 
secondary
schools, as defined in section 14101 of
the Elementary and Secondary Edu-
cation Act of 1965 (20 U.S.C. 8801).
‘‘(d) ORGANIZATIONAL CHARACTER AND AU-
TONOMY.—
‘‘(1) IN GENERAL.—A religious organi-
zation that provides assistance under a
program described in subsection (c)(4)
shall retain its autonomy from Federal,
State, and local governments, including
such organization’s control over the defi-
111
nition, development, practice, and ex-
pression of its religious beliefs.
‘‘(2) ADDITIONAL SAFEGUARDS.—Neither
the Federal Government nor a State or
local government shall require a religious
organization in order to be eligible to
provide assistance under a program de-
scribed in subsection (c)(4)—
‘‘(A) to alter its form of internal
governance; or
‘‘(B) to remove religious art, icons,
scripture, or other symbols because
they are religious.
‘‘(e) EMPLOYMENT PRACTICES.—
‘‘(1) IN GENERAL.—In order to aid in
the preservation of its religious char-
acter, a religious organization that pro-
vides assistance under a program de-
scribed in subsection (c)(4) may, notwith-
standing any other provision of law, re-
quire that its employees adhere to the re-
ligious practices of the organization.
‘‘(2) TITLE VII EXEMPTION.—The exemp-
tion of a religious organization provided
under section 702 or 703(e)(2) of the Civil
112
Rights Act of 1964 (42 U.S.C. 2000e–1,
2000e–2(e)(2)) 
regarding 
employment
practices shall not be affected by the reli-
gious organization’s provision of assist-
ance under, or receipt of funds from, a
program described in subsection (c)(4).
‘‘(3) EFFECT ON OTHER LAWS.—Nothing
in this section alters the duty of a reli-
gious organization to comply with the
nondiscrimination provisions in title VI
of the Civil Rights Act of 1964 (42 U.S.C.
2000d et seq.) (prohibiting discrimination
on the basis of race, color, and national
origin), title IX of the Education Amend-
ments of 1972 (20 U.S.C. 1681–1686) (pro-
hibiting discrimination in educational in-
stitutions on the basis of sex and visual
impairment), section 504 of the Rehabili-
tation Act of 1973 (29 U.S.C. 794) (prohib-
iting discrimination against otherwise
qualified disabled individuals), and the
Age Discrimination Act of 1975 (42 U.S.C.
6101–6107) (prohibiting discrimination on
the basis of age).
113
‘‘(f) RIGHTS
OF BENEFICIARIES
OF ASSIST-
ANCE.—
‘‘(1) IN GENERAL.—If an individual de-
scribed in paragraph (3) has an objection
to the religious character of the organiza-
tion from which the individual receives,
or 
would 
receive, 
assistance 
funded
under any program described in sub-
section (c)(4), the appropriate Federal,
State, or local governmental entity shall
provide to such individual (if otherwise
eligible for such assistance) within a rea-
sonable period of time after the date of
such objection, assistance that—
‘‘(A) is an alternative, including a
nonreligious alternative, that is ac-
cessible to the individual; and
‘‘(B) has a value that is not less
than the value of the assistance that
the individual would have received
from such organization.
‘‘(2) NOTICE.—The appropriate Fed-
eral, State, or local governmental entity
shall guarantee that notice is provided to
the individuals described in paragraph
114
(3) of the rights of such individuals under
this section.
‘‘(3) INDIVIDUAL
DESCRIBED.—An indi-
vidual described in this paragraph is an
individual who receives or applies for as-
sistance under a program described in
subsection (c)(4).
‘‘(g) NONDISCRIMINATION
AGAINST
BENE-
FICIARIES.—
‘‘(1) GRANTS
AND
CONTRACTS.—A reli-
gious organization providing assistance
through a grant or contract under a pro-
gram described in subsection (c)(4) shall
not discriminate, in carrying out the pro-
gram, against an individual described in
subsection (f)(3)on the basis of religion, a
religious belief, or a refusal to hold a reli-
gious belief.
‘‘(2) INDIRECT
FORMS
OF
DISBURSE-
MENT.—A 
religious 
organization 
pro-
viding assistance through a voucher, cer-
tificate, or other form of indirect dis-
bursement under a program described in
subsection (c)(4) shall not discriminate,
in carrying out the program, against an
115
individual described in subsection (f)(3)
on the basis of religion, a religious belief,
or a refusal to hold a religious belief.
‘‘(h) ACCOUNTABILITY.—
‘‘(1) IN GENERAL.—Except as provided
in paragraph (2), a religious organization
providing assistance under any program
described in subsection (c)(4) shall be
subject to the same regulations as other
nongovernmental organizations to ac-
count in accord with generally accepted
accounting principles for the use of such
funds provided under such program.
‘‘(2) LIMITED
AUDIT.—Such organiza-
tion shall segregate government funds
provided under such program into a sep-
arate account or accounts. Only the gov-
ernment funds shall be subject to audit
by the government.
‘‘(i) LIMITATIONS ON USE OF FUNDS FOR CER-
TAIN PURPOSES.—No funds provided through a
grant or contract to a religious organization
to provide assistance under any program de-
scribed in subsection (c)(4) shall be expended
for sectarian worship, instruction, or pros-
116
elytization. A certificate shall be signed by
such organizations and filed with the govern-
ment agency that disbursed the funds that
gives assurance the organization will comply
with this subsection.
‘‘(j) EFFECT ON STATE AND LOCAL FUNDS.—
If a State or local government contributes
State or local funds to carry out a program de-
scribed in subsection (c)(4), the State or local
government may segregate the State or local
funds from the Federal funds provided to
carry out the program or may commingle the
State or local funds with the Federal funds. If
the State or local government commingles the
State or local funds, the provisions of this sec-
tion shall apply to the commingled funds in
the same manner, and to the same extent, as
the provisions apply to the Federal funds.
‘‘(k) TREATMENT
OF
INTERMEDIATE
CON-
TRACTORS.—If a nongovernmental organiza-
tion (referred to in this subsection as an ‘in-
termediate contractor’), acting under a con-
tract or other agreement with the Federal
Government or a State or local government,
is given the authority under the contract or
117
agreement to select nongovernmental organi-
zations to provide assistance under the pro-
grams described in subsection (c)(4), the in-
termediate contractor shall have the same du-
ties under this section as the government
when selecting or otherwise dealing with sub-
contractors, but the intermediate contractor,
if it is a religious organization, shall retain all
other rights of a religious organization under
this section.
‘‘(l) COMPLIANCE.—A party alleging that
the rights of the party under this section have
been violated by a State or local government
may bring a civil action pursuant to section
1979 against the official or government agen-
cy that has allegedly committed such viola-
tion. A party alleging that the rights of the
party under this section have been violated
by the Federal Government may bring a civil
action for appropriate relief in Federal dis-
trict court against the official or government
agency that has allegedly committed such vio-
lation.’’.
118
TITLE III—INDIVIDUAL
DEVELOPMENT ACCOUNTS
SEC. 301. ADDITIONAL QUALIFIED ENTITIES ELIGIBLE TO
CONDUCT PROJECTS UNDER THE ASSETS
FOR INDEPENDENCE ACT.
Section 404(7)(A)(iii)(I)(aa) of the Assets
for Independence Act (42 U.S.C. 604 note) is
amended to read as follows:
‘‘(aa) a federally in-
sured credit union; or’’.
SEC. 302. INCREASE IN LIMITATION ON NET WORTH.
Section 408(a)(2)(A) of the Assets for Inde-
pendence Act (42 U.S.C. 604 note) is amended
by striking ‘‘$10,000’’ and inserting ‘‘$20,000’’.
SEC. 303. CHANGE IN LIMITATION ON DEPOSITS FOR AN IN-
DIVIDUAL.
Section 410(b) of the Assets for Independ-
ence Act (42 U.S.C. 604 note) is amended to
read as follows:
‘‘(b) LIMITATION ON DEPOSITS FOR AN INDI-
VIDUAL.—Not more than $500 from a grant
made under section 406(b) shall be provided
per year to any one individual during the
project.’’.
119
SEC. 304. ELIMINATION OF LIMITATION ON DEPOSITS FOR
A HOUSEHOLD.
Section 410 of the Assets for Independ-
ence Act (42 U.S.C. 604 note) is amended by
striking subsection (c) and redesignating sub-
sections (d) and (e) as subsections (c) and (d),
respectively.
SEC. 305. EXTENSION OF PROGRAM.
Section 416 of the Assets for Independ-
ence Act (42 U.S.C. 604 note) is amended by
striking ‘‘2001, 2002, and 2003’’ and inserting
‘‘and 2001, and $50,000,000 for each of fiscal
years 2002 through 2008’’.
SEC. 306. CONFORMING AMENDMENTS.
(a) AMENDMENTS
TO TEXT.—The text of
each of the following provisions of the Assets
for Independence Act (42 U.S.C. 604 note) is
amended by striking ‘‘demonstration’’ each
place it appears:
(1) Section 403.
(2) Section 404(2).
(3) Section 405(a).
(4) Section 405(b).
(5) Section 405(c).
(6) Section 405(d).
(7) Section 405(e).
120
(8) Section 405(g).
(9) Section 406(a).
(10) Section 406(b).
(11) Section 407(b)(1)(A).
(12) Section 407(c)(1)(A).
(13) Section 407(c)(1)(B).
(14) Section 407(c)(1)(C).
(15) Section 407(c)(1)(D).
(16) Section 407(d).
(17) Section 408(a).
(18) Section 408(b).
(19) Section 409.
(20) Section 410(e).
(21) Section 411.
(22) Section 412(a).
(23) Section 412(b)(2).
(24) Section 412(c).
(25) Section 413(a).
(26) Section 413(b).
(27) Section 414(a).
(28) Section 414(b).
(29) Section 414(c).
(30) Section 414(d)(1).
(31) Section 414(d)(2).
121
(b) AMENDMENTS
TO
SUBSECTION
HEAD-
INGS.—The heading of each of the following
provisions of the Assets for Independence Act
(42 U.S.C. 604 note) is amended by striking
‘‘DEMONSTRATION’’:
(1) Section 405(a).
(2) Section 406(a).
(3) Section 413(a).
(c) AMENDMENTS TO SECTION HEADINGS.—
The headings of sections 406 and 411 of the
Assets for Independence Act (42 U.S.C. 604
note) are amended by striking ‘‘DEMONSTRA-
TION’’.
SEC. 307. APPLICABILITY.
(a) IN GENERAL.—The amendments made
by this title shall apply to funds provided be-
fore, on or after the date of the enactment of
this Act.
(b) PRIOR AMENDMENTS.—The amendments
made by title VI of the Departments of Labor,
Health and Human Services, and Education,
and Related Agencies Appropriations Act,
2001 (as enacted into law by Public Law 106–
554) shall apply to funds provided before, on
or after the date of the enactment of such Act.
Union Calendar No. 81
107TH CONGRESS
1ST SESSION
H. R. 7
[Report No. 107–138, Parts I and II]
A BILL
To provide incentives for charitable contributions
by individuals and businesses, to improve the ef-
fectiveness and efficiency of government program
delivery to individuals and families in need, and
to enhance the ability of low-income Americans
to gain financial security by building assets.
JULY 12, 2001
Reported from the Committee on the Judiciary with
amendments
JULY 16, 2001
Reported from the Committee on Ways and Means with
an amendment, committed to the Committee of the
Whole House on the State of the Union, and ordered
to be printed