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‘‘(i) IN GENERAL.—The amount of the
credit determined under this section with
respect to any building shall not exceed the
clause (ii) percentage of the amount of the
credit which would (but for this subpara-
graph) be determined under this section
with respect to such building.
‘‘(ii) DETERMINATION
OF
PERCENT-
AGE.—For purposes of clause (i), the clause
(ii) percentage with respect to any building
is the percentage which—
‘‘(I) the rural investment credit
dollar amount allocated to such build-
ing bears to
‘‘(II) the credit amount deter-
mined in accordance with clause (iii).
‘‘(iii) 
DETERMINATION
OF
CREDIT
AMOUNT.—The credit amount determined in
accordance with this clause is the amount of
the credit which would (but for this sub-
paragraph) be determined under this section
with respect to the building if this section
were applied without regard to paragraph
(2)(A) of subsection (e).
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‘‘(D) RURAL INVESTMENT CREDIT AGENCY
TO SPECIFY APPLICABLE PERCENTAGE AND MAX-
IMUM ELIGIBLE BASIS.—In allocating a rural
investment credit dollar amount to any building,
the rural investment credit agency shall specify
the applicable percentage and the maximum eli-
gible basis which may be taken into account
under this section with respect to such building.
The applicable percentage and maximum eligible
basis so specified shall not exceed the applicable
percentage and eligible basis determined under
this section without regard to this subsection.
‘‘(6) OTHER DEFINITIONS.—For purposes of this
subsection—
‘‘(A) RURAL
INVESTMENT
CREDIT
AGEN-
CY.—The term ‘rural investment credit agency’
means any agency authorized to carry out this
subsection.
‘‘(B) POSSESSIONS TREATED AS STATES.—
The term ‘State’ includes a possession of the
United States.
‘‘(7) PORTION OF STATE CEILING SET-ASIDE FOR
QUALIFIED
RURAL
SMALL
BUSINESS
INVESTMENT
CREDITS.—Not more than 10 percent of the State
rural investment credit ceiling for any State for any
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calendar year may be allocated to qualified rural
small business investment credits under section 42B.
‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) COMPLIANCE PERIOD.—The term ‘compli-
ance period’ means, with respect to any building, the
period of 10 taxable years beginning with the 1st tax-
able year of the credit period with respect thereto.
‘‘(2) NEW BUILDING.—The term ‘new building’
means a building the original use of which begins
with the taxpayer.
‘‘(3) EXISTING
BUILDING.—The term ‘existing
building’ means any building which is not a new
building.
‘‘(4) APPLICATION TO ESTATES AND TRUSTS.—In
the case of an estate or trust, the amount of the credit
determined under subsection (a) and any increase in
tax under subsection (i) shall be apportioned between
the estate or trust and the beneficiaries on the basis
of the income of the estate or trust allocable to each.
‘‘(i) RECAPTURE OF CREDIT.—If—
‘‘(1) as of the close of any taxable year in the
compliance period, the amount of the eligible basis of
any building with respect to the taxpayer is less than
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‘‘(2) the amount of such basis as of the close of
the preceding taxable year,
then the taxpayer’s tax under this chapter for the tax-
able year shall be increased by the credit recapture
amount determined under rules similar to the rules of
section 42(j).
‘‘(j) CERTIFICATIONS AND OTHER REPORTS TO SEC-
RETARY.—
‘‘(1) CERTIFICATION WITH RESPECT TO 1ST YEAR
OF CREDIT PERIOD.—Following the close of the 1st
taxable year in the credit period with respect to any
qualified rural investment building, the taxpayer
shall certify to the Secretary (at such time and in
such form and in such manner as the Secretary pre-
scribes)—
‘‘(A) the taxable year, and calendar year, in
which such building was first placed in service,
‘‘(B) the eligible basis of such building as of
the beginning of the credit period,
‘‘(C) the maximum applicable percentage
and eligible basis permitted to be taken into ac-
count by the appropriate rural investment credit
agency under subsection (g),
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‘‘(D) the election made under subsection (f)
with respect to the qualified rural investment
project of which such building is a part, and
‘‘(E) such other information as the Sec-
retary may require.
In the case of a failure to make the certification re-
quired by the preceding sentence on the date pre-
scribed therefor, unless it is shown that such failure
is due to reasonable cause and not to willful neglect,
no credit shall be allowable by reason of subsection (a)
with respect to such building for any taxable year
ending before such certification is made.
‘‘(2) ANNUAL REPORTS TO THE SECRETARY.—
The Secretary may require taxpayers to submit an
information return (at such time and in such form
and manner as the Secretary prescribes) for each tax-
able year setting forth—
‘‘(A) the eligible basis for the taxable year
of each qualified rural investment building of the
taxpayer,
‘‘(B) the information described in para-
graph (1)(C) for the taxable year, and
‘‘(C) such other information as the Sec-
retary may require.
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The penalty under section 6652(j) shall apply to any
failure to submit the return required by the Secretary
under the preceding sentence on the date prescribed
therefor.
‘‘(3) ANNUAL
REPORTS
FROM
RURAL
INVEST-
MENT CREDIT AGENCIES.—Each agency which allo-
cates any rural investment credit amount to any
building for any calendar year shall submit to the
Secretary (at such time and in such manner as the
Secretary 
shall 
prescribe) 
an 
annual 
report
specifying—
‘‘(A) the amount of rural investment credit
amount allocated to each building for such year,
‘‘(B) sufficient information to identify each
such building and the taxpayer with respect
thereto, and
‘‘(C) such other information as the Sec-
retary may require.
The penalty under section 6652(j) shall apply to any
failure to submit the report required by the preceding
sentence on the date prescribed therefor.
‘‘(k) RESPONSIBILITIES
OF
RURAL
INVESTMENT
CREDIT AGENCIES.—
‘‘(1) PLANS FOR ALLOCATION OF CREDIT AMONG
INVESTMENT PROJECTS.—
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‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this section, the rural invest-
ment credit dollar amount with respect to any
building shall be zero unless—
‘‘(i) such amount was allocated pursu-
ant to a qualified rural investment plan of
the agency which is approved by the govern-
mental unit (in accordance with rules simi-
lar to the rules of section 147(f)(2) (other
than subparagraph (B)(ii) thereof)) of
which such agency is a part,
‘‘(ii) such agency notifies the chief ex-
ecutive officer (or the equivalent) of the local
jurisdiction within which the building is lo-
cated of such investment project and pro-
vides such individual a reasonable oppor-
tunity to comment on the investment
project,
‘‘(iii) a comprehensive market study of
the development needs of individuals in the
qualifying county to be served by the invest-
ment project is conducted before the credit
allocation is made and at the developer’s ex-
pense by a disinterested party who is ap-
proved by such agency, and
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‘‘(iv) a written explanation is avail-
able to the general public for any allocation
of a rural investment credit dollar amount
which is not made in accordance with es-
tablished priorities and selection criteria of
the rural investment credit agency.
‘‘(B) 
QUALIFIED
RURAL
INVESTMENT
PLAN.—For purposes of this section, the term
‘qualified rural investment plan’ means any
plan—
‘‘(i) which sets forth selection criteria
to be used to determine priorities of the
rural investment credit agency which are
appropriate to qualifying counties,
‘‘(ii) which also gives preference in al-
locating rural investment credit dollar
amounts among selected investment projects
to—
‘‘(I) investment projects that tar-
get those small rural counties with con-
sistently high rates of net out-migra-
tion,
‘‘(II) investment projects that link
the economic development and job cre-
ation efforts of 2 or more small rural
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counties with high rates of net out-mi-
gration, and
‘‘(III) investment projects that
link the economic development and job
creation efforts of 1 or more small
rural counties in the State with high
rates of net out-migration to related ef-
forts in regions of such State experi-
encing economic growth, and
‘‘(iii) which provides a procedure that
the agency (or an agent or other private
contractor of such agency) will follow in
monitoring for noncompliance with the pro-
visions of this section and in notifying the
Internal Revenue Service of such non-
compliance which such agency becomes
aware of and in monitoring for noncompli-
ance through regular site visits.
‘‘(C) CERTAIN SELECTION CRITERIA MUST
BE USED.—The selection criteria set forth in a
qualified rural investment plan must include—
‘‘(i) investment project location,
‘‘(ii) technology and transportation in-
frastructure needs, and
‘‘(iii) private development trends.
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‘‘(2) CREDIT ALLOCATED TO BUILDING NOT TO
EXCEED AMOUNT NECESSARY TO ASSURE INVESTMENT
PROJECT FEASIBILITY.—
‘‘(A) IN GENERAL.—The rural investment
credit dollar amount allocated to an investment
project shall not exceed the amount the rural in-
vestment credit agency determines is necessary
for the financial feasibility of the investment
project and its viability as a qualified rural in-
vestment project throughout the compliance pe-
riod.
‘‘(B) AGENCY EVALUATION.—In making the
determination under subparagraph (A), the
rural investment credit agency shall consider—
‘‘(i) the sources and uses of funds and
the total financing planned for the invest-
ment project,
‘‘(ii) any proceeds or receipts expected
to be generated by reason of tax benefits,
‘‘(iii) the percentage of the rural in-
vestment credit dollar amount used for in-
vestment project costs other than the cost of
intermediaries, and
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‘‘(iv) the reasonableness of the develop-
mental and operational costs of the invest-
ment project.
Clause (iii) shall not be applied so as to impede
the development of investment projects in hard-
to-develop areas.
‘‘(C) DETERMINATION MADE WHEN CREDIT
AMOUNT
APPLIED
FOR
AND
WHEN
BUILDING
PLACED IN SERVICE.—
‘‘(i) IN
GENERAL.—A determination
under subparagraph (A) shall be made as of
each of the following times:
‘‘(I) The application for the rural
investment credit dollar amount.
‘‘(II) The allocation of the rural
investment credit dollar amount.
‘‘(III) The date the building is
first placed in service.
‘‘(ii) CERTIFICATION AS TO AMOUNT OF
OTHER
SUBSIDIES.—Prior to each deter-
mination under clause (i), the taxpayer
shall certify to the rural investment credit
agency the full extent of all Federal, State,
and local subsidies which apply (or which
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the taxpayer expects to apply) with respect
to the building.
‘‘(l) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
carry out the purposes of this section, including
regulations—
‘‘(1) dealing with—
‘‘(A) investment projects which include
more than 1 building or only a portion of a
building,
‘‘(B) buildings which are sold in portions,
‘‘(2) providing for the application of this section
to short taxable years,
‘‘(3) preventing the avoidance of the rules of this
section, and
‘‘(4) providing the opportunity for rural invest-
ment credit agencies to correct administrative errors
and omissions with respect to allocations and record
keeping within a reasonable period after their dis-
covery, taking into account the availability of regula-
tions and other administrative guidance from the Sec-
retary.’’.
(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) (relating to current year business
credit), as amended by this Act, is amended by striking
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‘‘(3) is located in a qualifying county, and
‘‘(4) submitted a qualified business plan with re-
spect to which the rural investment credit agency
with jurisdiction over such qualifying county has al-
located a portion of the State rural investment ceiling
for such taxable year under section 42A(g)(7).
For purposes of paragraph (1), an employee shall be consid-
ered full-time if such employee is employed at least 30 hours
per week for 20 or more calendar weeks in the taxable year.
‘‘(d) QUALIFIED EXPENDITURES.—For purposes of
this section—
‘‘(1) IN GENERAL.—The term ‘qualified expendi-
tures’ means expenditures normally associated with
starting or expanding a business and included in a
qualified business plan, including costs for capital,
plant and equipment, inventory expenses, and wages,
but not including interest costs.
‘‘(2) ONLY CERTAIN EXPENDITURES INCLUDED
FOR EXISTING BUSINESSES.—In the case of a quali-
fied rural small business with respect to which a cred-
it under subsection (a) was allowed for a preceding
taxable year, such term shall include only so much of
the expenditures described in paragraph (1) for the
taxable year as exceed the aggregate of such expendi-
tures for the preceding taxable year.
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‘‘(e) QUALIFIED BUSINESS PLAN.—For purposes of
this section, the term ‘qualified business plan’ means a busi-
ness plan which—
‘‘(1) has been approved by the rural investment
credit agency with jurisdiction over the qualifying
county in which the qualified rural small business is
located pursuant to such agency’s rural investment
plan, and
‘‘(2) meets such requirements as the agency may
specify.
‘‘(f) DENIAL OF DOUBLE BENEFIT.—In the case of the
amount of the credit determined under this section—
‘‘(1) no deduction or credit shall be allowed for
such amount under any other provision of this chap-
ter, and
‘‘(2) no increase in the adjusted basis of any
property shall result from such amount.
‘‘(g) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) any term which is used in this section
which is used in section 42A shall have the meaning
given such term by section 42A, and
‘‘(2) rules similar to the rules under subsections
(j)(2), (j)(3), and (k) of section 42A shall apply.’’.
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(b) CURRENT YEAR BUSINESS CREDIT CALCULA-
TION.—Section 38(b) (relating to current year business
credit), as amended by this Act, is amended by striking
‘‘plus’’ at the end of paragraph (17), by striking the period
at the end of paragraph (18) and inserting ‘‘, plus’’, and
by adding at the end the following:
‘‘(19) the qualified rural small business invest-
ment credit determined under section 42B(a).’’.
(c) LIMITATION ON CARRYBACK.—Subsection (d) of
section 39 (relating to carryback and carryforward of un-
used credits), as amended by this Act, is amended by adding
at the end the following:
‘‘(13) NO
CARRYBACK
OF
QUALIFIED
RURAL
SMALL BUSINESS INVESTMENT CREDIT BEFORE EF-
FECTIVE DATE.—No portion of the unused business
credit for any taxable year which is attributable to
the qualified rural small business investment credit
determined under section 42B may be carried back to
a taxable year beginning before the date of the enact-
ment of the Jumpstart Our Business Strength
(JOBS) Act.’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by inserting after the item
relating to section 42A the following:
‘‘Sec. 42B. Qualified rural small business investment credit.’’.
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(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to expenditures made in taxable years
beginning after the date of the enactment of this Act.
SEC. 635. CREDIT FOR MAINTENANCE OF RAILROAD TRACK.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business-related credits), as
amended by this Act, is amended by adding at the end the
following new section:
‘‘SEC. 45I. RAILROAD TRACK MAINTENANCE CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 38, the
railroad track maintenance credit determined under this
section for the taxable year is an amount equal to 30 per-
cent of the qualified railroad track maintenance expendi-
tures paid or incurred by an eligible taxpayer during the
taxable year.
‘‘(b) LIMITATION.—The credit allowed under sub-
section (a) for any taxable year shall not exceed the product
of—
‘‘(1) $3,500, and
‘‘(2) the number of miles of railroad track owned
or leased by the eligible taxpayer as of the close of the
taxable year.
‘‘(c) ELIGIBLE TAXPAYER.—For purposes of this sec-
tion, the term ‘eligible taxpayer’ means—
‘‘(1) any Class II or Class III railroad, and
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‘‘(2) any person who transports property using
the rail facilities of a person described in paragraph
(1) or who furnishes railroad-related property or serv-
ices to such a person.
‘‘(d) QUALIFIED RAILROAD TRACK MAINTENANCE EX-
PENDITURES.—For purposes of this section, the term ‘quali-
fied railroad track maintenance expenditures’ means ex-
penditures (whether or not otherwise chargeable to capital
account) for maintaining railroad track (including road-
bed, bridges, and related track structures) owned or leased
as of January 1, 2005, by a Class II or Class III railroad.
‘‘(e) OTHER DEFINITIONS AND SPECIAL RULES.—
‘‘(1) CLASS
II
OR CLASS
III
RAILROAD.—For
purposes of this section, the terms ‘Class II railroad’
and ‘Class III railroad’ have the meanings given such
terms by the Surface Transportation Board.
‘‘(2) CONTROLLED
GROUPS.—Rules similar to
the rules of paragraph (1) of section 41(f) shall apply
for purposes of this section.
‘‘(3) BASIS ADJUSTMENT.—For purposes of this
subtitle, if a credit is allowed under this section with
respect to any railroad track, the basis of such track
shall be reduced by the amount of the credit so al-
lowed.
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‘‘(f) APPLICATION OF SECTION.—This section shall
apply to qualified railroad track maintenance expenditures
paid or incurred during taxable years beginning after De-
cember 31, 2004, and before January 1, 2008.’’.
(b) LIMITATION ON CARRYBACK.—Section 39(d) (relat-
ing to transition rules), as amended by this Act, is amended
by adding at the end the following new paragraph:
‘‘(14) NO CARRYBACK OF RAILROAD TRACK MAIN-
TENANCE CREDIT BEFORE EFFECTIVE DATE.—No por-
tion of the unused business credit for any taxable year
which is attributable to the railroad track mainte-
nance credit determined under section 45I may be
carried to a taxable year beginning before January 1,
2005.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 38(b) (relating to general business
credit), as amended by this Act, is amended by strik-
ing ‘‘plus’’ at the end of paragraph (18), by striking
the period at the end of paragraph (19) and inserting
‘‘, plus’’, and by adding at the end the following new
paragraph:
‘‘(20) the railroad track maintenance credit de-
termined under section 45I(a).’’.
(2) Subsection (a) of section 1016, as amended
by this Act, is amended by striking ‘‘and’’ at the end
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of paragraph (28), by striking the period at the end
of paragraph (29) and inserting ‘‘, and’’, and by add-
ing at the end the following new paragraph:
‘‘(30) in the case of railroad track with respect
to which a credit was allowed under section 45I, to
the extent provided in section 45I(e)(3).’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by inserting after the item
relating to section 45H the following new item:
‘‘Sec. 45I. Railroad track maintenance credit.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 636. RAILROAD REVITALIZATION AND SECURITY IN-
VESTMENT CREDIT.
(a) RAILROAD REVITALIZATION AND SECURITY IN-
VESTMENT CREDIT.—
(1) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business-related
credits), as amended by this Act, is amended by add-
ing at the end the following new section:
‘‘SEC. 45J. RAILROAD REVITALIZATION AND SECURITY IN-
VESTMENT CREDIT.
‘‘(a) GENERAL RULE.—For purposes of section 38, the
railroad revitalization and security investment credit deter-
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mined under this section for the taxable year is the amount
equal to 50 percent of the qualified project expenditures
paid or incurred by the taxpayer during the taxable year.
‘‘(b) QUALIFIED PROJECT EXPENDITURES.—
‘‘(1) IN GENERAL.—For purposes of this section,
the term ‘qualified project expenditures’ means, with
respect to any project for intercity passenger rail
transportation (as defined under section 24102 of title
49, United States Code) which is included in a State
rail plan, expenditures (whether or not otherwise
chargeable to capital account) for—
‘‘(A) planning,
‘‘(B) environmental review and environ-
mental impact mitigation,
‘‘(C) track and track structure rehabilita-
tion, relocation, improvement, and development,
‘‘(D) railroad safety and security improve-
ments,
‘‘(E) communications and signaling im-
provements,
‘‘(F) intercity passenger rail equipment ac-
quisition, and
‘‘(G) rail station and intermodal facilities
development.
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‘‘(2) EXCEPTIONS.—An expenditure shall not be
treated as a qualified project expenditure unless all
persons which conduct rail operations over the infra-
structure with respect to which such an expenditure
is made—
‘‘(A) are employers for purposes of the Rail-
road Retirement Act of 1974 and are carriers for
purposes of the Railway Labor Act (unless such
a person is an operator with respect to commuter
rail passenger transportation (as defined in sec-
tion 24102(4) of title 49, United States Code) of
a State or local government authority (as such
terms are defined in section 5302 of such title)
eligible to receive financial assistance under sec-
tion 5307 of such title, a contractor performing
services in connection with the operations with
respect to commuter rail passenger transpor-
tation (as so defined), or the Alaska Railroad or
its contractors),
‘‘(B) provide assurances to the State that
any collective bargaining agreements with such a
person’s employees (including terms regulating
the contracting of work) will remain in full force
and effect according to the terms of the agree-
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ments for work performed for such a person on
the railroad transportation corridor, and
‘‘(C) comply with the protective agreements
established under section 504 of the Railroad Re-
vitalization and Regulatory Reform Act of 1976
with respect to employees affected by actions
taken in connection with the project.
‘‘(c) LIMITATION.—
‘‘(1) IN GENERAL.—The amount of the credit al-
lowed under subsection (a) for any taxable year with
respect to any project for which qualified project ex-
penditures are made shall not exceed the limitation
allocated to such project under this subsection for the
calendar year in which the taxable year begins.
‘‘(2) STATE LIMITATION.—
‘‘(A) IN GENERAL.—There is a State rail-
road revitalization and security investment cred-
it limitation for each calendar year. Such limi-
tation is the amount which bears the same ratio
to $165,000,000 as the allocation number for
such State bears to the allocation number for all
States.
‘‘(B) ALLOCATION NUMBER.—For purposes
of subparagraph (A), the allocation number is,
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with respect to any State, the sum of the fol-
lowing:
‘‘(i) The number of railroad and public
road at grade crossings on intercity pas-
senger rail routes within the State.
‘‘(ii) The number of intercity passenger
train miles within the State.
‘‘(iii) The number of intercity embar-
kations and disembarkations for each pas-
senger within the State.
‘‘(3) UNUSED CREDIT CARRYOVERS ALLOCATED
AMONG CERTAIN STATES.—
‘‘(A) IN GENERAL.—The unused credit car-
ryover for all States for any calendar year shall
be reallocated to each qualified State in an
amount which bears the same ratio to the unused
credit carryover for all States for the calendar as
the allocation number for such qualified State
bears to the allocation number for all qualified
States.
‘‘(B) UNUSED
CREDIT
CARRYOVER.—For
purposes of this paragraph, the term ‘unused
credit carryover’ means, with respect to any
State, the excess of the State limitation (deter-
mined under paragraph (2)) for the calendar
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year over the amount allocated by the State
under paragraph (4) for such calendar year.
‘‘(C) QUALIFIED STATES.—For purposes of
this paragraph, the term ‘qualified State’ means
any State—
‘‘(i) which allocated its entire State
limitation amount under paragraph (4) for
the calendar year, and
‘‘(ii) for which a request is made to re-
ceive an allocation under this paragraph.
‘‘(4) ALLOCATION WITHIN STATES.—Each State
shall allocate the limitation amount allocated to such
State under paragraphs (2) and (3) to projects for
intercity passenger rail transportation which are in-
cluded in the State rail plan of such State.
‘‘(5) NEW YORK CITY RAIL PROJECTS.—
‘‘(A) IN
GENERAL.—In addition to the
amounts allocated under paragraph (2), the Sec-
retary shall allocate a limitation of $200,000,000
to New York City, New York, for qualified
project expenditures within the New York Lib-
erty Zone (as defined in section 1400L(h)) for
the period described in subsection (h).
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‘‘(B) ALLOCATION
AMONG
PROJECTS.—Of
the limitation allocated under subparagraph
(A)—
‘‘(i) $100,000,000 shall be allocated to
projects designated by the Mayor of New
York City, New York, and
‘‘(ii) $100,000,000 shall be allocated to
projects designated by the Governor of New
York.
‘‘(C) SPECIAL RULE REGARDING QUALIFIED
PROJECT EXPENDITURES.—For purposes of this
paragraph, a qualified project expenditure shall
include any expenditure for improvements to
subway systems, for commuter rail systems, for
rail links to airports, and for public infrastruc-
ture improvements in the vicinity of rail or sub-
way stations.
‘‘(d) STATE RAIL PLAN.—For purposes of this section,
the term ‘State rail plan’ means a plan prepared and
maintained in accordance with chapter 225 of title 49,
United States Code.
‘‘(e) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect
to any property, the basis of such property shall be reduced
by the amount of the credit so allowed.
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‘‘(f) NO DOUBLE BENEFIT.—No credit shall be allowed
under this section with respect to any expenditures for
which a credit is allowed under section 45I.
‘‘(g) CREDIT TRANSFERABILITY.—Any credit allow-
able under this section may be transferred (but not more
than once) if—
‘‘(1) the credit exceeds the tax liability of the
taxpayer for the taxable year, or
‘‘(2) the taxpayer is not subject to any tax im-
posed by this chapter by reason of having a tax-ex-
empt status.
‘‘(h) APPLICATION OF SECTION.—This section shall
apply to qualified project expenditures paid or incurred
during taxable years beginning after December 31, 2004,
and before January 1, 2008.’’.
(2) LIMITATION ON CARRYBACK.—Section 39(d)
(relating to transition rules), as amended by this Act,
is amended by adding at the end the following new
paragraph:
‘‘(15) NO CARRYBACK OF SECTION 45J CREDIT
BEFORE EFFECTIVE DATE.—No portion of the unused
business credit for any taxable year which is attrib-
utable to the credit determined under section 45J(a)
may be carried back to any taxable year beginning
before January 1, 2005.’’.
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(3) CONFORMING AMENDMENTS.—
(A) Section 38(b) (relating to general busi-
ness credit), as amended by this Act, is amended
by striking ‘‘plus’’ at the end of paragraph (19),
by striking the period at the end of paragraph
(20) and inserting ‘‘, plus’’, and by adding at
the end the following new paragraph:
‘‘(21) the railroad revitalization and security in-
vestment credit determined under section 45J(a).’’.
(B) Subsection (a) of section 1016, as
amended by this Act, is amended by striking
‘‘and’’ at the end of paragraph (29), by striking
the period at the end of paragraph (30) and in-
serting ‘‘, and’’, and by adding at the end the
following new paragraph:
‘‘(31) in the case of property with respect to
which a credit was allowed under section 45J, to the
extent provided in section 45J(e).’’.
(4) CLERICAL AMENDMENT.—The table of sec-
tions for subpart D of part IV of subchapter A of
chapter 1, as amended by this Act, is amended by in-
serting after the item relating to section 45I the fol-
lowing new item:
‘‘Sec. 45J. Railroad revitalization and security investment credit.’’.
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(5) EFFECTIVE DATE.—The amendments made
by this section shall apply to taxable years beginning
after December 31, 2004.
(b) STATE RAIL PLANS.—
(1) IN GENERAL.—Part B of subtitle V of title
49, United States Code, is amended by adding at the
end the following:
‘‘CHAPTER 225—STATE RAIL PLANS
‘‘Sec.
‘‘22501. Authority.
‘‘22502. Purposes.
‘‘22503. Transparency; coordination.
‘‘22504. Content.
‘‘22505. Approval.
‘‘22506. Definitions.
‘‘§ 22501. Authority
‘‘(a) IN GENERAL.—Each State may prepare and
maintain a State rail plan in accordance with the provi-
sions of this chapter.
‘‘(b) REQUIREMENTS.—For the preparation and peri-
odic revision of a State rail plan, a State shall—
‘‘(1) establish or designate a State rail transpor-
tation authority to prepare, maintain, coordinate,
and administer the plan;
‘‘(2) establish or designate a State rail plan ap-
proval authority to approve the plan;
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‘‘(3) make the State’s approved plan available to
the public and transmit a copy to the Secretary of
Transportation; and
‘‘(4) revise the plan no less frequently than once
every 5 years.
‘‘§ 22502. Purposes
‘‘(a) PURPOSES.—The purposes of a State rail plan
are as follows:
‘‘(1) To set forth State policy involving freight
and passenger rail transportation, including com-
muter rail operations, in the State.
‘‘(2) To present priorities and strategies to en-
hance rail service in the State that benefits the public.
‘‘(3) To serve as the basis for Federal and State
rail investments within the State.
‘‘(b) CONTENT.—The State rail plan shall establish the
period covered by such plan.
‘‘(c) CONSISTENCY WITH STATE TRANSPORTATION EF-
FORTS.—A State rail plan shall be consistent with the State
transportation planning goals and programs and shall set
forth rail transportation’s role within the State transpor-
tation system.
‘‘§ 22503. Transparency; coordination
‘‘(a) PREPARATION.—A State shall provide adequate
and reasonable notice and opportunity for comment and
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‘‘(2) A comprehensive review of all rail lines
within the State, including proposed high speed rail
corridors and significant rail line segments not cur-
rently in service.
‘‘(3) A statement of the State’s passenger rail
service objectives, including minimum service levels,
for intercity passenger rail transportation routes in
the State.
‘‘(4) A general analysis of rail’s transportation,
economic, and environmental impacts in the State,
including congestion mitigation, trade and economic
development, air quality, land-use, energy-use, and
community impacts.
‘‘(5) A long-range rail investment program for
current and future freight and passenger infrastruc-
ture in the State that meets the requirements of sub-
section (b).
‘‘(6) A statement of public financing issues for
rail projects and service in the State, including a list
of current and prospective public capital and oper-
ating funding resources, public subsidies, State tax-
ation, and other financial policies relating to rail in-
frastructure development.
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‘‘(7) An identification of rail infrastructure
issues within the State that reflects consultation with
all relevant stake holders.
‘‘(8) A review of major passenger and freight
intermodal rail connections and facilities within the
State, including seaports, and prioritized options to
maximize service integration and efficiency between
rail and other modes of transportation within the
State.
‘‘(9) A review of publicly funded projects within
the State to improve rail transportation safety and
security, including all major projects funded under
section 130 of title 23.
‘‘(10) A performance evaluation of passenger rail
services operating in the State, including possible im-
provements in those services, and a description of
strategies to achieve those improvements.
‘‘(11) A compilation of studies and reports on
high-speed rail corridor development within the State
not included in a previous plan under this chapter,
and a plan for funding any recommended develop-
ment of such corridors in the State.
‘‘(12) A statement that the State satisfies the
conditions set forth in section 22102.
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‘‘(b) LONG-RANGE SERVICE AND INVESTMENT PRO-
GRAM.—
‘‘(1) PROGRAM CONTENT.—A long-range rail in-
vestment program included in a State rail plan
under subsection (a)(5) shall include the following
matters:
‘‘(A) Two lists for rail capital projects, 1
list for freight rail capital projects and 1 list for
intercity passenger rail capital projects.
‘‘(B) A detailed funding plan for the
projects.
‘‘(2) PROJECT
LIST
CONTENT.—The lists of
freight and intercity passenger rail capital projects
shall contain—
‘‘(A) a description of the anticipated public
and private benefits of each such project; and
‘‘(B) 
a 
statement 
of 
the 
correlation
between—
‘‘(i) public funding contributions for
the projects; and
‘‘(ii) the public benefits.
‘‘(3) CONSIDERATIONS FOR PROJECT LIST.—In
preparing the list of freight and intercity passenger
rail capital projects, a State rail transportation au-
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thority shall take into consideration the following
matters:
‘‘(A) Contributions made by non-Federal
and non-State sources through user fees, match-
ing funds, or other private capital involvement.
‘‘(B) Rail capacity and congestion effects.
‘‘(C) Effects to highway, aviation, and mar-
itime capacity, congestion, or safety.
‘‘(D) Regional balance.
‘‘(E) Environmental impact.
‘‘(F) Economic and employment impacts.
‘‘(G) Projected ridership and other service
measures for passenger rail projects.
‘‘§ 22505. Approval
‘‘The State rail plan approval authority established or
designated under section 22501(b)(2) may approve a State
rail plan for the purposes of this chapter if—
‘‘(1) the plan meets all of the requirements appli-
cable to State plans under this chapter;
‘‘(2) for each ready-to-commence project listed on
the ranked list of freight and intercity passenger rail
capital improvement projects under the plan—
‘‘(A) the project meets all safety and envi-
ronmental requirements, including those pre-
scribed under the National Environmental Pol-
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icy Act of 1969 (42 U.S.C. 4331 et seq.) that are
applicable to the project under law; and
‘‘(B) the State has entered into an agree-
ment with any owner of rail infrastructure or
right-of-way directly affected by the project that
provides for the State to proceed with the project
and includes assurances regarding capacity and
compensation for use of such infrastructure or
right-of-way, if applicable; and
‘‘(3) the content of the plan is coordinated with
State transportation plans developed pursuant to sec-
tion 135 of title 23.
‘‘§ 22506. Definitions
‘‘In this chapter:
‘‘(1) PRIVATE
BENEFIT.—The term ‘private
benefit’—
‘‘(A) means a benefit accrued to a person or
private entity, other than the National Railroad
Passenger Corporation, that directly improves
the economic and competitive condition of that
person or entity through improved assets, cost re-
ductions, service improvements, or other means;
and
‘‘(B) shall be determined on a project-by-
project basis, based upon an agreement between
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the State and the affected persons or private en-
tities.
‘‘(2) 
PUBLIC
BENEFIT.—The 
term 
‘public
benefit’—
‘‘(A) means a benefit accrued to the public
in the form of enhanced mobility of people or
goods, environmental protection or enhancement,
congestion mitigation, enhanced trade and eco-
nomic development, improved air quality or
land use, more efficient energy use, enhanced
public safety or security, reduction of public ex-
penditures due to improved transportation effi-
ciency or infrastructure preservation, and other
positive community effects; and
‘‘(B) shall be determined on a project-by-
project basis, based upon an agreement between
the State and the persons or private entities in-
volved in the project.
‘‘(3) STATE.—The term ‘State’ means any of the
50 States and the District of Columbia.
‘‘(4) STATE
RAIL
TRANSPORTATION
AUTHOR-
ITY.—The term ‘State rail transportation authority’
means the State agency or official responsible under
the direction of the Chief Executive of the State or a
State law for preparation, maintenance, coordina-
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tion, and administration of the State rail plan under
this chapter.’’.
(2) CLERICAL AMENDMENT.—The table of chap-
ters at the beginning of subtitle V of title 49, United
States Code, is amended by inserting after the item
relating to chapter 223 the following:
‘‘225. STATE RAIL PLANS...................................................................................22501.’’.
SEC. 
637. 
MODIFICATION 
OF 
TARGETED 
AREAS 
DES-
IGNATED FOR NEW MARKETS TAX CREDIT.
(a) IN GENERAL.—Paragraph (2) of section 45D(e) is
amended to read as follows:
‘‘(2) TARGETED
POPULATIONS.—The Secretary
shall prescribe regulations under which 1 or more tar-
geted populations (within the meaning of section
103(20) of the Riegle Community Development and
Regulatory Improvement Act of 1994 (12 U.S.C.
4702(20))) may be treated as low-income commu-
nities. Such regulations shall include procedures for
determining which entities are qualified active low-
income community businesses with respect to such
populations.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to designations made by the Secretary
of the Treasury after the date of the enactment of this Act.
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SEC. 638. MODIFICATION OF INCOME REQUIREMENT FOR
CENSUS TRACTS WITHIN HIGH MIGRATION
RURAL COUNTIES.
(a) IN GENERAL.—Section 45D(e) (relating to low-in-
come community) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(4) MODIFICATION
OF
INCOME
REQUIREMENT
FOR CENSUS TRACTS WITHIN HIGH MIGRATION RURAL
COUNTIES.—
‘‘(A) IN GENERAL.—In the case of a popu-
lation census tract located within a high migra-
tion rural county, paragraph (1)(B)(i) shall be
applied by substituting ‘85 percent’ for ‘80 per-
cent’.
‘‘(B) HIGH MIGRATION RURAL COUNTY.—
For purposes of this paragraph, the term ‘high
migration rural county’ means any county
which, during the 20-year period ending with the
year in which the most recent census was con-
ducted, has a net out-migration of inhabitants
from the county of at least 10 percent of the pop-
ulation of the county at the beginning of such pe-
riod.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect as if included in the amendment
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made by section 121(a) of the Community Renewal Tax Re-
lief Act of 2000.
SEC. 639. CREDIT FOR INVESTMENT IN TECHNOLOGY TO
MAKE MOTION PICTURES MORE ACCESSIBLE
TO THE DEAF AND HARD OF HEARING.
(a) IN GENERAL.—
(1) ALLOWANCE OF CREDIT.—Subpart D of part
IV of subchapter A of chapter 1 (relating to business
related credits), as amended by this Act, is amended
by adding at the end the following new section:
‘‘SEC. 45T. EXPENDITURES TO PROVIDE ACCESS TO MOTION
PICTURES FOR THE DEAF AND HARD OF
HEARING.
‘‘(a) GENERAL RULE.—For purposes of section 38, in
the case of an eligible taxpayer, the motion picture accessi-
bility credit for any taxable year shall be an amount equal
to 50 percent of the qualified expenditures made by the eli-
gible taxpayer during the taxable year.
‘‘(b) ELIGIBLE TAXPAYER.—For purposes of this sec-
tion, the term ‘eligible taxpayer’ means a taxpayer who is
in the business of—
‘‘(1) showing motion pictures to the public in
theaters, or
‘‘(2) producing or distributing such motion pic-
tures.
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‘‘(c) QUALIFIED EXPENDITURES.—For purposes of
this section, the term ‘qualified expenditures’ means
amounts paid or incurred by the taxpayer for the purpose
of making motion pictures accessible to individuals who are
deaf or hard of hearing through the use of captioning tech-
nology.
‘‘(d) BASIS ADJUSTMENT.—For purposes of this sub-
title, if a credit is allowed under this section with respect
to any property, the basis of such property shall be reduced
by the amount of the credit so allowed.
‘‘(e) NO DOUBLE BENEFIT.—In the case of the credit
determined under this section, no deduction or credit shall
be allowed for such amount under any other provision of
this chapter.’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 38(b) (relating to general busi-
ness credit), as amended by this Act, is amended
by striking ‘‘plus’’ at the end of paragraph (30),
by striking the period at the end of paragraph
(31) and inserting ‘‘, plus’’, and by adding at
the end the following new paragraph:
‘‘(32) the motion picture accessibility credit de-
termined under section 45T(a).’’.
(B) Subsection (a) of section 1016, as
amended by this Act, is amended by striking
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‘‘and’’ at the end of paragraph (38), by striking
the period at the end of paragraph (39) and in-
serting ‘‘, and’’, and by adding at the end the
following new paragraph:
‘‘(40) in the case of property with respect to
which a credit was allowed under section 45T, to the
extent provided in section 45T(d).’’.
(b) LIMITATION ON CARRYBACK.—Section 39(d) (relat-
ing to transition rules) is amended by adding at the end
the following new paragraph:
‘‘(16) NO CARRYBACK OF MOTION PICTURE AC-
CESSIBILITY CREDIT BEFORE EFFECTIVE DATE.—No
portion of the unused business credit for any taxable
year which is attributable to the motion picture acces-
sibility credit determined under section 45T may be
carried to a taxable year beginning before January 1,
2004.’’.
(c) CLERICAL AMENDMENT.—The table of sections for
subpart D of part IV of subchapter A of chapter 1, as
amended by this Act, is amended by inserting after the item
relating to section 45S the following new item:
‘‘Sec. 45T. Expenditures to provide access to motion pictures for the
deaf and hard of hearing.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003.
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Subtitle E—Miscellaneous
Provisions
SEC. 641. EXCLUSION OF GAIN OR LOSS ON SALE OR EX-
CHANGE OF CERTAIN BROWNFIELD SITES
FROM UNRELATED BUSINESS TAXABLE IN-
COME.
(a) IN GENERAL.—Subsection (b) of section 512 (relat-
ing to unrelated business taxable income), as amended by
this Act, is amended by adding at the end the following
new paragraph:
‘‘(19) TREATMENT OF GAIN OR LOSS ON SALE OR
EXCHANGE OF CERTAIN BROWNFIELD SITES.—
‘‘(A) IN GENERAL.—Notwithstanding para-
graph (5)(B), there shall be excluded any gain or
loss from the qualified sale, exchange, or other
disposition of any qualifying brownfield prop-
erty by an eligible taxpayer.
‘‘(B) ELIGIBLE TAXPAYER.—For purposes of
this paragraph—
‘‘(i) IN GENERAL.—The term ‘eligible
taxpayer’ means, with respect to a property,
any organization exempt from tax under
section 501(a) which—
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‘‘(I) acquires from an unrelated
person a qualifying brownfield prop-
erty, and
‘‘(II) pays or incurs eligible reme-
diation expenditures with respect to
such property in an amount which ex-
ceeds the greater of $550,000 or 12 per-
cent of the fair market value of the
property at the time such property was
acquired by the eligible taxpayer, de-
termined as if there was not a presence
of a hazardous substance, pollutant, or
contaminant on the property which is
complicating the expansion, redevelop-
ment, or reuse of the property.
‘‘(ii) EXCEPTION.—Such term shall not
include any organization which is—
‘‘(I) potentially liable under sec-
tion 107 of the Comprehensive Envi-
ronmental 
Response, 
Compensation,
and Liability Act of 1980 with respect
to the qualifying brownfield property,
‘‘(II) affiliated with any other
person which is so potentially liable
through any direct or indirect familial
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relationship or any contractual, cor-
porate, or financial relationship (other
than a contractual, corporate, or fi-
nancial relationship which is created
by the instruments by which title to
any qualifying brownfield property is
conveyed or financed or by a contract
of sale of goods or services), or
‘‘(III) the result of a reorganiza-
tion of a business entity which was so
potentially liable.
‘‘(C) 
QUALIFYING
BROWNFIELD
PROP-
ERTY.—For purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘quali-
fying brownfield property’ means any real
property which is certified, before the tax-
payer incurs any eligible remediation ex-
penditures (other than to obtain a Phase I
environmental site assessment), by an ap-
propriate State agency (within the meaning
of section 198(c)(4)) in the State in which
such property is located as a brownfield site
within the meaning of section 101(39) of the
Comprehensive 
Environmental 
Response,
Compensation, and Liability Act of 1980
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(as in effect on the date of the enactment of
this paragraph).
‘‘(ii) REQUEST FOR CERTIFICATION.—
Any request by an eligible taxpayer for a
certification described in clause (i) shall in-
clude a sworn statement by the eligible tax-
payer and supporting documentation of the
presence of a hazardous substance, pollut-
ant, or contaminant on the property which
is complicating the expansion, redevelop-
ment, or reuse of the property given the
property’s reasonably anticipated future
land uses or capacity for uses of the prop-
erty (including a Phase I environmental
site assessment and, if applicable, evidence
of the property’s presence on a local, State,
or Federal list of brownfields or contami-
nated property) and other environmental
assessments prepared or obtained by the
taxpayer.
‘‘(D) QUALIFIED
SALE, 
EXCHANGE, 
OR
OTHER
DISPOSITION.—For purposes of this
paragraph—
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‘‘(i) IN GENERAL.—A sale, exchange, or
other disposition of property shall be con-
sidered as qualified if—
‘‘(I) such property is transferred
by the eligible taxpayer to an unrelated
person, and
‘‘(II) within 1 year of such trans-
fer the eligible taxpayer has received a
certification from the Environmental
Protection Agency or an appropriate
State agency (within the meaning of
section 198(c)(4)) in the State in
which such property is located that, as
a result of the eligible taxpayer’s reme-
diation actions, such property would
not 
be 
treated 
as 
a 
qualifying
brownfield property in the hands of the
transferee.
For purposes of subclause (II), before
issuing such certification, the Environ-
mental Protection Agency or appropriate
State agency shall respond to comments re-
ceived pursuant to clause (ii)(V) in the
same form and manner as required under
section 117(b) of the Comprehensive Envi-
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ronmental Response, Compensation, and Li-
ability Act of 1980 (as in effect on the date
of the enactment of this paragraph).
‘‘(ii) REQUEST FOR CERTIFICATION.—
Any request by an eligible taxpayer for a
certification described in clause (i) shall be
made not later than the date of the transfer
and shall include a sworn statement by the
eligible taxpayer certifying the following:
‘‘(I) Remedial actions which com-
ply with all applicable or relevant and
appropriate requirements (consistent
with section 121(d) of the Comprehen-
sive Environmental Response, Com-
pensation, and Liability Act of 1980)
have been substantially completed, such
that there are no hazardous substances,
pollutants, or contaminants which
complicate the expansion, redevelop-
ment, or reuse of the property given the
property’s reasonably anticipated fu-
ture land uses or capacity for uses of
the property.
‘‘(II) The reasonably anticipated
future land uses or capacity for uses of
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the property are more economically
productive or environmentally bene-
ficial than the uses of the property in
existence on the date of the certification
described in subparagraph (C)(i). For
purposes of the preceding sentence, use
of property as a landfill or other haz-
ardous waste facility shall not be con-
sidered more economically productive
or environmentally beneficial.
‘‘(III) A remediation plan has
been implemented to bring the property
into compliance with all applicable
local, State, and Federal environ-
mental laws, regulations, and stand-
ards and to ensure that the remedi-
ation protects human health and the
environment.
‘‘(IV) The remediation plan de-
scribed in subclause (III), including
any physical improvements required to
remediate the property, is either com-
plete or substantially complete, and, if
substantially complete, sufficient moni-
toring, funding, institutional controls,
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and financial assurances have been put
in place to ensure the complete remedi-
ation of the property in accordance
with the remediation plan as soon as
is reasonably practicable after the sale,
exchange, or other disposition of such
property.
‘‘(V) Public notice and the oppor-
tunity for comment on the request for
certification was completed before the
date of such request. Such notice and
opportunity for comment shall be in
the same form and manner as required
for public participation required under
section 117(a) of the Comprehensive
Environmental Response, Compensa-
tion, and Liability Act of 1980 (as in
effect on the date of the enactment of
this paragraph). For purposes of this
subclause, public notice shall include,
at a minimum, publication in a major
local newspaper of general circulation.
‘‘(iii) 
ATTACHMENT
TO
TAX
RE-
TURNS.—A copy of each of the requests for
certification described in clause (ii) of sub-
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paragraph (C) and this subparagraph shall
be included in the tax return of the eligible
taxpayer (and, where applicable, of the
qualifying partnership) for the taxable year
during which the transfer occurs.
‘‘(iv) SUBSTANTIAL COMPLETION.—For
purposes of this subparagraph, a remedial
action is substantially complete when any
necessary physical construction is complete,
all immediate threats have been eliminated,
and all long-term threats are under control.
‘‘(E) ELIGIBLE
REMEDIATION
EXPENDI-
TURES.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘eligible
remediation expenditures’ means, with re-
spect to any qualifying brownfield property,
any amount paid or incurred by the eligible
taxpayer to an unrelated third person to ob-
tain a Phase I environmental site assess-
ment of the property, and any amount so
paid or incurred after the date of the certifi-
cation described in subparagraph (C)(i) for
goods and services necessary to obtain a cer-
tification described in subparagraph (D)(i)
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with respect to such property, including
expenditures—
‘‘(I) to manage, remove, control,
contain, abate, or otherwise remediate
a hazardous substance, pollutant, or
contaminant on the property,
‘‘(II) to obtain a Phase II envi-
ronmental site assessment of the prop-
erty, including any expenditure to
monitor, sample, study, assess, or oth-
erwise evaluate the release, threat of re-
lease, or presence of a hazardous sub-
stance, pollutant, or contaminant on
the property,
‘‘(III) to obtain environmental
regulatory certifications and approvals
required to manage the remediation
and monitoring of the hazardous sub-
stance, pollutant, or contaminant on
the property, and
‘‘(IV) regardless of whether it is
necessary to obtain a certification de-
scribed in subparagraph (D)(i)(II), to
obtain remediation cost-cap or stop-
loss coverage, re-opener or regulatory
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action coverage, or similar coverage
under environmental insurance poli-
cies, or financial guarantees required
to manage such remediation and moni-
toring.
‘‘(ii) EXCEPTIONS.—Such term shall
not include—
‘‘(I) any portion of the purchase
price paid or incurred by the eligible
taxpayer to acquire the qualifying
brownfield property,
‘‘(II) 
environmental 
insurance
costs paid or incurred to obtain legal
defense coverage, owner/operator liabil-
ity coverage, lender liability coverage,
professional liability coverage, or simi-
lar types of coverage,
‘‘(III) any amount paid or in-
curred to the extent such amount is re-
imbursed, funded, or otherwise sub-
sidized by grants provided by the
United States, a State, or a political
subdivision of a State for use in con-
nection with the property, proceeds of
an issue of State or local government
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obligations used to provide financing
for the property the interest of which is
exempt from tax under section 103, or
subsidized financing provided (directly
or indirectly) under a Federal, State,
or local program provided in connec-
tion with the property, or
‘‘(IV) any expenditure paid or in-
curred before the date of the enactment
of this paragraph.
For purposes of subclause (III), the Sec-
retary may issue guidance regarding the
treatment of government-provided funds for
purposes of determining eligible remediation
expenditures.
‘‘(F) DETERMINATION OF GAIN OR LOSS.—
For purposes of this paragraph, the determina-
tion of gain or loss shall not include an amount
treated as gain which is ordinary income with
respect to section 1245 or section 1250 property,
including amounts deducted as section 198 ex-
penses which are subject to the recapture rules of
section 198(e), if the taxpayer had deducted such
amounts in the computation of its unrelated
business taxable income.
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‘‘(G) 
SPECIAL
RULES
FOR
PARTNER-
SHIPS.—
‘‘(i) IN GENERAL.—In the case of an
eligible taxpayer which is a partner of a
qualifying partnership which acquires, re-
mediates, and sells, exchanges, or otherwise
disposes of a qualifying brownfield prop-
erty, this paragraph shall apply to the eligi-
ble taxpayer’s distributive share of the
qualifying partnership’s gain or loss from
the sale, exchange, or other disposition of
such property.
‘‘(ii) QUALIFYING PARTNERSHIP.—The
term ‘qualifying partnership’ means a part-
nership which—
‘‘(I) has a partnership agreement
which satisfies the requirements of sec-
tion 514(c)(9)(B)(vi) at all times be-
ginning on the date of the first certifi-
cation received by the partnership
under subparagraph (C)(i),
‘‘(II) satisfies the requirements of
subparagraphs (B)(i), (C), (D), and
(E), if ‘qualified partnership’ is sub-
stituted for ‘eligible taxpayer’ each
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place it appears therein (except sub-
paragraph (D)(iii)), and
‘‘(III) is not an organization
which would be prevented from consti-
tuting an eligible taxpayer by reason
of subparagraph (B)(ii).
‘‘(iii) REQUIREMENT
THAT
TAX-EX-
EMPT PARTNER BE A PARTNER SINCE FIRST
CERTIFICATION.—This 
paragraph 
shall
apply with respect to any eligible taxpayer
which is a partner of a partnership which
acquires, remediates, and sells, exchanges, or
otherwise 
disposes 
of 
a 
qualifying
brownfield property only if such eligible
taxpayer was a partner of the qualifying
partnership at all times beginning on the
date of the first certification received by the
partnership under subparagraph (C)(i) and
ending on the date of the sale, exchange, or
other disposition of the property by the
partnership.
‘‘(iv) REGULATIONS.—The Secretary
shall prescribe such regulations as are nec-
essary to prevent abuse of the requirements
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of this subparagraph, including abuse
through—
‘‘(I) the use of special allocations
of gains or losses, or
‘‘(II) changes in ownership of
partnership interests held by eligible
taxpayers.
‘‘(H) SPECIAL RULES FOR MULTIPLE PROP-
ERTIES.—
‘‘(i) IN
GENERAL.—An eligible tax-
payer or a qualifying partnership of which
the eligible taxpayer is a partner may make
a 1-time election to apply this paragraph to
more than 1 qualifying brownfield property
by averaging the eligible remediation ex-
penditures for all such properties acquired
during the election period. If the eligible
taxpayer or qualifying partnership makes
such an election, the election shall apply to
all qualified sales, exchanges, or other dis-
positions of qualifying brownfield properties
the acquisition and transfer of which occur
during the period for which the election re-
mains in effect.
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‘‘(ii) ELECTION.—An election under
clause (i) shall be made with the eligible
taxpayer’s or qualifying partnership’s time-
ly filed tax return (including extensions) for
the first taxable year for which the taxpayer
or qualifying partnership intends to have
the election apply. An election under clause
(i) is effective for the period—
‘‘(I) beginning on the date which
is the first day of the taxable year of
the return in which the election is in-
cluded or a later day in such taxable
year selected by the eligible taxpayer or
qualifying partnership, and
‘‘(II) ending on the date which is
the earliest of a date of revocation se-
lected by the eligible taxpayer or quali-
fying partnership, the date which is 8
years after the date described in sub-
clause (I), or, in the case of an election
by a qualifying partnership of which
the eligible taxpayer is a partner, the
date of the termination of the quali-
fying partnership.
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‘‘(iii) REVOCATION.—An eligible tax-
payer or qualifying partnership may revoke
an election under clause (i)(II) by filing a
statement of revocation with a timely filed
tax return (including extensions). A revoca-
tion is effective as of the first day of the
taxable year of the return in which the rev-
ocation is included or a later day in such
taxable year selected by the eligible taxpayer
or qualifying partnership. Once an eligible
taxpayer or qualifying partnership revokes
the election, the eligible taxpayer or quali-
fying partnership is ineligible to make an-
other election under clause (i) with respect
to any qualifying brownfield property sub-
ject to the revoked election.
‘‘(I) RECAPTURE.—If an eligible taxpayer
excludes gain or loss from a sale, exchange, or
other disposition of property to which an election
under subparagraph (H) applies, and such prop-
erty fails to satisfy the requirements of this
paragraph, the unrelated business taxable income
of the eligible taxpayer for the taxable year in
which such failure occurs shall be determined by
including any previously excluded gain or loss
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from such sale, exchange, or other disposition al-
locable to such taxpayer, and interest shall be de-
termined at the overpayment rate established
under section 6621 on any resulting tax for the
period beginning with the due date of the return
for the taxable year during which such sale, ex-
change, or other disposition occurred, and ending
on the date of payment of the tax.
‘‘(J) RELATED PERSONS.—For purposes of
this paragraph, a person shall be treated as re-
lated to another person if—
‘‘(i) such person bears a relationship to
such other person described in section
267(b) (determined without regard to para-
graph (9) thereof), or section 707(b)(1), de-
termined by substituting ‘25 percent’ for ‘50
percent’ each place it appears therein, and
‘‘(ii) in the case such other person is a
nonprofit organization, if such person con-
trols directly or indirectly more than 25
percent of the governing body of such orga-
nization.’’
(b) EXCLUSION FROM DEFINITION OF DEBT-FINANCED
PROPERTY.—Section 514(b)(1) (defining debt-financed
property) is amended by striking ‘‘or’’ at the end of sub-
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paragraph (C), by striking the period at the end of subpara-
graph (D) and inserting ‘‘; or’’, and by inserting after sub-
paragraph (D) the following new subparagraph:
‘‘(E) any property the gain or loss from the
sale, exchange, or other disposition of which
would be excluded by reason of the provisions of
section 512(b)(19) in computing the gross income
of any unrelated trade or business.’’.
(c) SAVINGS CLAUSE.—Nothing in the amendments
made by this section shall affect any duty, liability, or other
requirement imposed under any other Federal or State law.
Notwithstanding section 128(b) of the Comprehensive Envi-
ronmental Response, Compensation, and Liability Act of
1980, a certification provided by the Environmental Protec-
tion Agency or an appropriate State agency (within the
meaning of section 198(c)(4) of the Internal Revenue Code
of 1986) shall not affect the liability of any person under
section 107(a) of such Act.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to any gain or loss on the sale, exchange,
or other disposition of any property acquired by the tax-
payer after December 31, 2004.
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SEC. 642. MODIFICATION OF UNRELATED BUSINESS IN-
COME LIMITATION ON INVESTMENT IN CER-
TAIN DEBT-FINANCED PROPERTIES.
(a) IN GENERAL.—Section 514(c)(6) (relating to ac-
quisition indebtedness) is amended—
(1) by striking ‘‘include an obligation’’ and in-
serting ‘‘include—
‘‘(A) an obligation’’,
(2) by striking the period at the end and insert-
ing ‘‘, or’’, and
(3) by adding at the end the following:
‘‘(B) indebtedness incurred by a small busi-
ness investment company licensed under the
Small Business Investment Act of 1958 which is
evidenced by a debenture—
‘‘(i) issued by such company under sec-
tion 303(a) of such Act, and
‘‘(ii) held or guaranteed by the Small
Business Administration.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to acquisitions made on or after the date
of the enactment of this Act.
SEC. 643. CIVIL RIGHTS TAX RELIEF.
(a) DEDUCTION ALLOWED WHETHER OR NOT TAX-
PAYER ITEMIZES OTHER DEDUCTIONS.—Subsection (a) of
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section 62 (defining adjusted gross income) is amended by
inserting after paragraph (18) the following new item:
‘‘(19) COSTS INVOLVING DISCRIMINATION SUITS,
ETC.—Any deduction allowable under this chapter for
attorney fees and court costs paid by, or on behalf of,
the taxpayer in connection with any action involving
a claim of unlawful discrimination (as defined in
subsection (e)) or a claim of a violation of subchapter
III of chapter 37 of title 31, United States Code or
a claim made under section 1862(b)(3)(A) of the So-
cial Security Act (42 U.S.C. 1395y(b)(3)(A)). The
preceding sentence shall not apply to any deduction
in excess of the amount includible in the taxpayer’s
gross income for the taxable year on account of a
judgment or settlement (whether by suit or agreement
and whether as lump sum or periodic payments) re-
sulting from such claim.’’.
(b) UNLAWFUL DISCRIMINATION DEFINED.—Section
62 is amended by adding at the end the following new sub-
section:
‘‘(e) UNLAWFUL DISCRIMINATION DEFINED.—For pur-
poses of subsection (a)(19), the term ‘unlawful discrimina-
tion’ means an act that is unlawful under any of the fol-
lowing:
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‘‘(ii) regulating any aspect of the em-
ployment relationship, including claims for
wages, compensation, or benefits, or prohib-
iting the discharge of an employee, the dis-
crimination against an employee, or any
other form of retaliation or reprisal against
an employee for asserting rights or taking
other actions permitted by law.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to fees and costs paid after December
31, 2002, with respect to any judgment or settlement occur-
ring after such date.
SEC. 644. EXCLUSION FOR PAYMENTS TO INDIVIDUALS
UNDER NATIONAL HEALTH SERVICE CORPS
LOAN REPAYMENT PROGRAM AND CERTAIN
STATE LOAN REPAYMENT PROGRAMS.
(a) IN GENERAL.—Section 108(f) (relating to student
loans) is amended by adding at the end the following new
paragraph:
‘‘(4) PAYMENTS UNDER NATIONAL HEALTH SERV-
ICE CORPS LOAN REPAYMENT PROGRAM AND CERTAIN
STATE LOAN REPAYMENT PROGRAMS.—In the case of
an individual, gross income shall not include any
amount received under section 338B(g) of the Public
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Health Service Act or under a State program de-
scribed in section 338I of such Act.’’.
(b) TREATMENT
FOR PURPOSES
OF EMPLOYMENT
TAXES.—Each of the following provisions is amended by
inserting ‘‘108(f)(4),’’ after ‘‘74(c),’’:
(1) Section 3121(a)(20).
(2) Section 3231(e)(5).
(3) Section 3306(b)(16).
(4) Section 3401(a)(19).
(5) Section 209(a)(17) of the Social Security
Act.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to amounts received by an individual
in taxable years beginning after December 31, 2003.
SEC. 645. CERTAIN EXPENSES OF RURAL LETTER CAR-
RIERS.
(a) IN GENERAL.—Section 162(o) (relating to treat-
ment of certain reimbursed expenses of rural mail carriers)
is amended by redesignating paragraph (2) as paragraph
(3) and by inserting after paragraph (1) the following:
‘‘(2) SPECIAL RULE WHERE EXPENSES EXCEED
REIMBURSEMENTS.—Notwithstanding 
paragraph
(1)(A), if the expenses incurred by an employee for
the use of a vehicle in performing services described
in paragraph (1) exceed the qualified reimbursements
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for such expenses, such excess shall be taken into ac-
count in computing the miscellaneous itemized deduc-
tions of the employee under section 67.’’.
(b) CONFORMING AMENDMENT.—The heading for sec-
tion 162(o) is amended by striking ‘‘REIMBURSED’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003.
SEC. 646. METHOD OF ACCOUNTING FOR NAVAL SHIP-
BUILDERS.
(a) IN GENERAL.—In the case of a qualified naval
ship contract, the taxable income of such contract during
the 5-taxable year period beginning with the taxable year
in which the contract commencement date occurs shall be
determined under a method identical to the method used
in the case of a qualified ship contract (as defined in section
10203(b)(2)(B) of the Revenue Act of 1987).
(b) RECAPTURE OF TAX BENEFIT.—In the case of a
qualified naval ship contract to which subsection (a) ap-
plies, the taxpayer’s tax imposed by chapter 1 of the Inter-
nal Revenue Code of 1986 for the first taxable year fol-
lowing the 5-taxable year period described in subsection (a)
shall be increased by the excess (if any) of—
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(1) the amount of tax which would have been im-
posed during such period if this section had not been
enacted, over
(2) the amount of tax so imposed during such
period.
(c) QUALIFIED NAVAL SHIP CONTRACT.—For purposes
of this section—
(1) IN
GENERAL.—The term ‘‘qualified naval
ship contract’’ means any contract or portion thereof
that is for the construction in the United States of 1
ship or submarine for the Federal Government if the
taxpayer reasonably expects the acceptance date will
occur no later than 9 years after the construction
commencement date.
(2) ACCEPTANCE DATE.—The term ‘‘acceptance
date’’ means the date 1 year after the date on which
the Federal Government issues a letter of acceptance
or other similar document for the ship or submarine.
(3) CONSTRUCTION COMMENCEMENT DATE.—The
term ‘‘construction commencement date’’ means the
date on which the physical fabrication of any section
or component of the ship or submarine begins.
(d) EFFECTIVE DATE.—This section shall apply to
contracts for ships or submarines with respect to which the
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construction commencement date occurs after the date of the
enactment of this Act.
SEC. 647. SUSPENSION OF POLICYHOLDERS SURPLUS AC-
COUNT PROVISIONS.
(a) DISTRIBUTIONS TO SHAREHOLDERS FROM PRE-
1984 POLICYHOLDERS SURPLUS ACCOUNT.—Section 815
(relating to distributions to shareholders from pre-1984 pol-
icyholders surplus account) is amended by adding at the
end the following:
‘‘(g) SPECIAL RULES APPLICABLE DURING 2004 AND
2005.—In the case of any taxable year of a stock life insur-
ance company beginning after December 31, 2003, and be-
fore January 1, 2006—
‘‘(1) the amount under subsection (a)(2) for such
taxable year shall be treated as zero, and
‘‘(2) notwithstanding subsection (b), in deter-
mining any subtractions from an account under sub-
sections (c)(3) and (d)(3), any distribution to share-
holders during such taxable year shall be treated as
made first out of the policyholders surplus account,
then out of the shareholders surplus account, and fi-
nally out of other accounts.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003.
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SEC. 648. PAYMENT OF DIVIDENDS ON STOCK OF COOPERA-
TIVES WITHOUT REDUCING PATRONAGE DIVI-
DENDS.
(a) IN GENERAL.—Subsection (a) of section 1388 (re-
lating to patronage dividend defined) is amended by adding
at the end the following new sentence: ‘‘For purposes of
paragraph (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 extent 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
payable 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 begin-
ning after the date of the enactment of this Act.
SEC. 649. SPECIAL RULES FOR LIVESTOCK SOLD ON AC-
COUNT OF WEATHER-RELATED CONDITIONS.
(a) REPLACEMENT OF LIVESTOCK WITH OTHER FARM
PROPERTY.—Subsection (f) of section 1033 (relating to in-
voluntary conversions) is amended—
(1) by inserting ‘‘drought, flood, or other weath-
er-related conditions, or’’ after ‘‘because of’’,
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(2) by inserting ‘‘in the case of soil contamina-
tion or other environmental contamination’’ after
‘‘including real property’’, and
(3) by striking ‘‘WHERE THERE HAS BEEN EN-
VIRONMENTAL CONTAMINATION’’ in the heading and
inserting ‘‘IN CERTAIN CASES’’.
(b) EXTENSION OF REPLACEMENT PERIOD OF INVOL-
UNTARILY CONVERTED LIVESTOCK.—Subsection (e) of sec-
tion 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 para-
graph:
‘‘(2) EXTENSION OF REPLACEMENT PERIOD.—
‘‘(A) IN GENERAL.—In the case of drought,
flood, or other weather-related conditions de-
scribed in paragraph (1) which result in the
area being designated as eligible for assistance
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-
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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.’’.
(c) INCOME INCLUSION RULES.—Section 451(e) (relat-
ing to special rule for proceeds from livestock sold on ac-
count of drought, flood, or other weather-related conditions)
is amended by adding at the end the following new para-
graph:
‘‘(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.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 650. MOTOR VEHICLE DEALER TRANSITIONAL ASSIST-
ANCE.
(a) IN GENERAL.—For purposes of subtitle A of the
Internal Revenue Code of 1986, in the case of a taxpayer
who elects the application of this section and who was a
party to a motor vehicle sales and service agreement with
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a motor vehicle manufacturer who announced in December
2000 that it would phase-out the motor vehicle brand to
which such agreement relates—
(1) amounts received by such taxpayer from such
manufacturer on account of the termination of such
agreement (hereafter in this section referred to as
‘‘termination payment’’) are considered to be received
for property used in the trade or business of a motor
vehicle retail sales and service dealership, and
(2) to the extent such termination payment is re-
invested in property used in a motor vehicle retail
sales and service dealership located within the United
States, such property shall qualify as like-kind re-
placement property to which section 1031 of the In-
ternal Revenue Code of 1986 shall apply with the fol-
lowing modifications:
(A) Such section shall be applied without
regard to subparagraphs (A) and (B)(ii) of sub-
section (a)(3).
(B) 
The 
period 
described 
in 
section
1031(a)(3)(B) of such Code shall be applied by
substituting ‘‘2 years’’ for ‘‘180 days’’.
(b) RULES FOR ELECTION.—
(1) FORM
OF
ELECTION.—The taxpayer shall
make an election under this section in such form and
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manner as the Secretary of the Treasury may pre-
scribe and shall include in such election the amount
of the termination payment received, the identifica-
tion of the replacement property purchased, and such
other information as the Secretary may prescribe.
(2) ELECTION ON AMENDED RETURN.—The Sec-
retary of the Treasury shall permit an election under
this section on an amended tax return for taxable
years beginning before the date of the enactment of
this Act.
(c) STATUTE OF LIMITATIONS.—Notwithstanding the
provisions of any other law or rule of law, the statutory
period for the assessment for any deficiency attributable to
any termination payment gain shall be extended until 3
years after the date the Secretary of the Treasury is notified
by the taxpayer of the like-kind replacement property or
an intention not to replace.
(d) EFFECTIVE DATE.—This section shall apply to
amounts received after December 12, 2000, in taxable years
ending after such date.
SEC. 651. EXPANSION OF DESIGNATED RENEWAL COMMU-
NITY AREA BASED ON 2000 CENSUS DATA.
(a) RENEWAL COMMUNITIES.—Section 1400E (relat-
ing to designation of renewal communities) is amended by
adding at the end the following new subsection:
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‘‘(g) EXPANSION OF DESIGNATED AREAS.—
‘‘(1) EXPANSION BASED ON 2000 CENSUS.—At
the request of the nominating entity with respect to
a renewal community, the Secretary of Housing and
Urban Development may expand the area of a re-
newal community to include any census tract—
‘‘(A) which, at the time such community
was nominated, met the requirements of this sec-
tion for inclusion in such community but for the
failure of such tract to meet 1 or more of the
population and poverty rate requirements of this
section using 1990 census data, and
‘‘(B) which meets all failed population and
poverty rate requirements of this section using
2000 census data.
‘‘(2) EXPANSION TO CERTAIN AREAS WHICH DO
NOT MEET POPULATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—At the request of 1 or
more local governments and the State or States
in which an area described in subparagraph (B)
is located, the Secretary of Housing and Urban
Development may expand a designated area to
include such area.
‘‘(B) AREA.—An area is described in this
subparagraph if—
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‘‘(i) the area is adjacent to at least 1
other area designated as a renewal commu-
nity,
‘‘(ii) the area has a population less
than the population required under sub-
section (c)(2)(C), and
‘‘(iii)(I) the area meets the require-
ments of subparagraphs (A) and (B) of sub-
section (c)(2) and subparagraph (A) of sub-
section (c)(3), or
‘‘(II) the area contains a population of
less than 100 people.
‘‘(3) APPLICABILITY.—Any expansion of a re-
newal community under this section shall take effect
as provided in subsection (b).’’.
(b) EFFECTIVE DATE.—The amendment made by this
subsection shall take effect as if included in the amendments
made by section 101 of the Community Renewal Tax Relief
Act of 2000.
SEC. 652. REDUCTION OF HOLDING PERIOD TO 12 MONTHS
FOR PURPOSES OF DETERMINING WHETHER
HORSES ARE SECTION 1231 ASSETS.
(a) IN
GENERAL.—Subparagraph (A) of section
1231(b)(3) (relating to definition of property used in the
trade or business) is amended by striking ‘‘and horses’’.
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(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003.
SEC. 653. BLUE RIBBON COMMISSION ON COMPREHENSIVE
TAX REFORM.
(a) ESTABLISHMENT.—
(1) IN GENERAL.—There is established the ‘‘Blue
Ribbon Commission on Comprehensive Tax Reform’’
(in this section referred to as the ‘‘Commission’’).
(2) MEMBERSHIP.—
(A) COMPOSITION.—The Commission shall
be composed of 17 members of whom—
(i) 3 shall be appointed by the major-
ity leader of the Senate;
(ii) 3 shall be appointed by the minor-
ity leader of the Senate;
(iii) 3 shall be appointed by the Speak-
er of the House of Representatives;
(iv) 3 shall be appointed by the minor-
ity leader of the House of Representatives;
and
(v) 5 shall be appointed by the Presi-
dent, of which no more than 3 shall be of
the same party as the President.
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(B) FEDERAL
EMPLOYEES.—The members
of the Commission may be employees or former
employees of the Federal Government.
(C) DATE.—The appointments of the mem-
bers of the Commission shall be made not later
than October 30, 2004.
(3) PERIOD
OF
APPOINTMENT; VACANCIES.—
Members shall be appointed for the life of the Com-
mission. Any vacancy in the Commission shall not af-
fect its powers, but shall be filled in the same manner
as the original appointment.
(4) INITIAL MEETING.—Not later than 30 days
after the date on which all members of the Commis-
sion have been appointed, the Commission shall hold
its first meeting.
(5) MEETINGS.—The Commission shall meet at
the call of the Chairman.
(6) QUORUM.—A majority of the members of the
Commission shall constitute a quorum, but a lesser
number of members may hold hearings.
(7) CHAIRMAN AND VICE CHAIRMAN.—The Presi-
dent shall select a Chairman and Vice Chairman
from among its members.
(b) DUTIES OF THE COMMISSION.—
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(1) STUDY.—The Commission shall conduct a
thorough study of all matters relating to a com-
prehensive reform of the Federal tax system, including
the reform of the Internal Revenue Code of 1986 and
the implementation (if appropriate) of other types of
tax systems.
(2) RECOMMENDATIONS.—The Commission shall
develop recommendations on how to comprehensively
reform the Federal tax system in a manner that gen-
erates appropriate revenue for the Federal Govern-
ment.
(3) REPORT.—Not later than 18 months after the
date on which all initial members of the commission
have been appointed pursuant to subsection (a)(2),
the Commission shall submit a report to the President
and Congress which shall contain a detailed state-
ment of the findings and conclusions of the Commis-
sion, together with its recommendations for such legis-
lation and administrative actions as it considers ap-
propriate.
(c) POWERS OF THE COMMISSION.—
(1) HEARINGS.—The Commission may hold such
hearings, sit and act at such times and places, take
such testimony, and receive such evidence as the Com-
mission considers advisable to carry out this Act.
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(2) INFORMATION FROM FEDERAL AGENCIES.—
The Commission may secure directly from any Fed-
eral department or agency such information as the
Commission considers necessary to carry out this Act.
Upon request of the Chairman of the Commission, the
head of such department or agency shall furnish such
information to the Commission.
(3) POSTAL SERVICES.—The Commission may
use the United States mails in the same manner and
under the same conditions as other departments and
agencies of the Federal Government.
(4) GIFTS.—The Commission may accept, use,
and dispose of gifts or donations of services or prop-
erty.
(d) COMMISSION PERSONNEL MATTERS.—
(1) COMPENSATION OF MEMBERS.—Each mem-
ber of the Commission who is not an officer or em-
ployee of the Federal Government shall be com-
pensated at a rate equal to the daily equivalent of the
annual rate of basic pay prescribed for level IV of the
Executive Schedule under section 5315 of title 5,
United States Code, for each day (including travel
time) during which such member is engaged in the
performance of the duties of the Commission. All
members of the Commission who are officers or em-
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ployees of the United States shall serve without com-
pensation in addition to that received for their serv-
ices as officers or employees of the United States.
(2) TRAVEL
EXPENSES.—The members of the
Commission shall be allowed travel expenses, includ-
ing per diem in lieu of subsistence, at rates author-
ized for employees of agencies under subchapter I of
chapter 57 of title 5, United States Code, while away
from their homes or regular places of business in the
performance of services for the Commission.
(3) STAFF.—
(A) IN
GENERAL.—The Chairman of the
Commission may, without regard to the civil
service laws and regulations, appoint and termi-
nate an executive director and such other addi-
tional personnel as may be necessary to enable
the Commission to perform its duties. The em-
ployment of an executive director shall be subject
to confirmation by the Commission.
(B) COMPENSATION.—The Chairman of the
Commission may fix the compensation of the ex-
ecutive director and other personnel without re-
gard to chapter 51 and subchapter III of chapter
53 of title 5, United States Code, relating to clas-
sification of positions and General Schedule pay
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rates, except that the rate of pay for the executive
director and other personnel may not exceed the
rate payable for level V of the Executive Schedule
under section 5316 of such title.
(4) DETAIL OF GOVERNMENT EMPLOYEES.—Any
Federal Government employee may be detailed to the
Commission without reimbursement, and such detail
shall be without interruption or loss of civil service
status or privilege.
(5) PROCUREMENT OF TEMPORARY AND INTER-
MITTENT SERVICES.—The Chairman of the Commis-
sion may procure temporary and intermittent services
under section 3109(b) of title 5, United States Code,
at rates for individuals which do not exceed the daily
equivalent of the annual rate of basic pay prescribed
for level V of the Executive Schedule under section
5316 of such title.
(e) TERMINATION OF THE COMMISSION.—The Com-
mission shall terminate 90 days after the date on which
the Commission submits its report under subsection (b).
(f) AUTHORIZATION OF APPROPRIATIONS.—There are
authorized to be appropriated such sums as are necessary
to the Commission to carry out this section.
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SEC. 654. TREATMENT OF DISTRIBUTIONS BY ESOPS WITH
RESPECT TO S CORPORATION STOCK.
(a) IN GENERAL.—Section 4975(d) of the Internal
Revenue Code of 1986 is amended by adding at the end
the following new flush sentences:
‘‘A plan shall not be treated as violating the requirements
of section 401, 409, or subsection (e)(7), or as engaging in
a prohibited transaction for purposes of paragraph (3),
merely by reason of any distribution described in section
1368(a) with respect to S corporation stock which con-
stitutes qualifying employer securities if the distribution is,
in accordance with the plan provisions, used to make pay-
ments on a loan described in paragraph (3) the proceeds
of which were used to acquire the qualifying employer secu-
rities (whether or not allocated to participants). The pre-
ceding sentence shall not apply in the case of a distribution
which is paid with respect to any employer security which
is allocated to a participant unless the plan provides that
employer securities with a fair market value of not less than
the amount of such distribution are allocated to such partic-
ipant for the year which (but for the preceding sentence)
such distribution would have been allocated to such partici-
pant.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on January 1, 1998.
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SEC. 655. CLARIFICATION OF WORKING CAPITAL FOR REA-
SONABLY ANTICIPATED NEEDS OF A BUSI-
NESS 
FOR 
PURPOSES 
OF 
ACCUMULATED
EARNINGS TAX.
(a) IN GENERAL.—Section 537(b) (relating to special
rules) is amended by adding at the end the following new
paragraph:
‘‘(6) WORKING CAPITAL.—The reasonably antici-
pated needs of a business for any taxable year shall
include working capital for the business in an
amount which is not less than the sum of the cost of
goods, operating expenses, taxes, and interest expense
which the business incurred during the preceding tax-
able year. Any amounts incurred as part of a plan
a principal purpose of which is to increase the limi-
tation under this subsection shall not be taken into
account.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003, and before January 1, 2009.
SEC. 656. TAX TREATMENT OF STATE OWNERSHIP OF RAIL-
ROAD REAL ESTATE INVESTMENT TRUST.
(a) IN GENERAL.—If a State owns all of the out-
standing stock of a corporation which is a real estate invest-
ment trust, which is a non-operating class III railroad, and
substantially all of the activities of which consist of the
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ownership, leasing, and operation by such corporation of
facilities, equipment, and other property used by the cor-
poration or other persons in railroad transportation, then,
for purposes of section 115 of the Internal Revenue Code
of 1986—
(1) income derived from such activities by the
corporation shall be treated as accruing to the State,
and
(2) such activities shall be treated as the exercise
of an essential governmental function of the State to
the extent such activities are of a type which are an
essential government function (within the meaning of
section 115 of such Code).
(b) GAIN OR LOSS NOT RECOGNIZED ON CONVER-
SION.—Notwithstanding section 337(d) of the Internal Rev-
enue Code of 1986—
(1) no gain or loss shall be recognized under sec-
tion 336 or 337 of such Code, and
(2) no change in basis of the property of such
corporation shall occur,
because of any change of status of the corporation to a tax-
exempt entity by reason of the application of subsection (a).
(c) TAX-EXEMPT FINANCING.—Any obligation issued
by an entity described in subsection (a) shall be treated as
an obligation of the State for purposes of applying section
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103 and part IV of subchapter B of chapter 1 of the Internal
Revenue Code of 1986.
(d) DEFINITIONS.—For purposes of this section—
(1) REAL
ESTATE
INVESTMENT
TRUST.—The
term ‘‘real estate investment trust’’ has the meaning
given such term by section 856(a) of the Internal Rev-
enue Code of 1986.
(2) NON-OPERATING CLASS III RAILROAD.—The
term ‘‘non-operating class III railroad’’ has the
meaning given such term by part A of subtitle IV of
title 49, United States Code (49 U.S.C. 10101 et seq.)
and the regulations thereunder.
(3) STATE.—The term ‘‘State’’ includes—
(A) the District of Columbia and any pos-
session of the United States, and
(B) any authority, agency, or public cor-
poration of a State.
(e) APPLICABILITY.—
(1) IN GENERAL.—Except as provided in para-
graph (2), this section shall apply on and after the
date on which a State becomes the owner of all of the
outstanding stock of a corporation described in sub-
section (a).
(2) EXCEPTION.—This section shall not apply to
any State which—
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(A) becomes the owner of all of the voting
stock of a corporation described in subsection (a)
after December 31, 2003, or
(B) becomes the owner of all of the out-
standing stock of a corporation described in sub-
section (a) after December 31, 2005.
SEC. 657. CLARIFICATION OF CONTRIBUTION IN AID OF
CONSTRUCTION FOR WATER AND SEWERAGE
DISPOSAL UTILITIES.
(a) IN
GENERAL.—Subparagraph (A) of section
118(c)(3) (relating to definitions) is amended to read as
follows:
‘‘(A) CONTRIBUTION IN AID OF CONSTRUC-
TION.—The term ‘contribution in aid of con-
struction’ shall be defined by regulations pre-
scribed by the Secretary, except that such term—
‘‘(i) shall include amounts paid as cus-
tomer connection fees (including amounts
paid to connect the customer’s water service
line or sewer lateral line to the utility’s dis-
tribution or collection system or extend a
main water or sewer line to provide service
to a customer), and
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‘‘(ii) shall not include amounts paid as
service charges for starting or stopping serv-
ices.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to contributions made after the date
of the enactment of this Act.
SEC. 658. CREDIT FOR PURCHASE AND INSTALLATION OF
AGRICULTURAL WATER CONSERVATION SYS-
TEMS.
(a) IN GENERAL.—Subpart B of part IV of subchapter
A of chapter 1 (relating to foreign tax credit, etc.) is amend-
ed by adding at the end the following new section:
‘‘SEC. 30B. PURCHASE AND INSTALLATION OF AGRICUL-
TURAL WATER CONSERVATION SYSTEMS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eligi-
ble taxpayer, there shall be allowed as a credit against the
tax imposed by this chapter for the taxable year an amount
equal to 30 percent of the water conservation system ex-
penses paid or incurred by the taxpayer during such year.
‘‘(b) LIMITATIONS.—The credit allowed by subsection
(a) with respect to any acre of land which is served by a
water conservation system shall not exceed the excess of—
‘‘(1) $500, over
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‘‘(2) the amount of credit allowed under this sec-
tion with respect to such acre for all prior taxable
years.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) ELIGIBLE
TAXPAYER.—The term ‘eligible
taxpayer’ means any taxpayer if—
‘‘(A) at least 50 percent of such taxpayer’s
gross income is normally derived from farm
land, and
‘‘(B) such taxpayer complies with all Fed-
eral, State, and local water rights and environ-
mental laws.
‘‘(2) 
WATER
CONSERVATION
SYSTEM
EX-
PENSES.—
‘‘(A) IN GENERAL.—The term ‘water con-
servation system expenses’ means expenses for the
purchase and installation of a water conserva-
tion system but only if—
‘‘(i) the land served by the water con-
servation system is entirely in a county or
county-equivalent area which has received,
in the taxable year the expenses were paid
or incurred or in any of the 3 preceding
taxable years, a primary-county designa-
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tion due to drought by the Secretary of Ag-
riculture, and
‘‘(ii) such system is certified as saving
at least 5 percent more irrigation water
than the irrigation system which was used
on such land immediately prior to the in-
stallation of such water conservation sys-
tem.
For purposes of clause (ii), irrigation water sav-
ings shall be determined and certified under reg-
ulations prescribed jointly by the Natural Re-
sources Conservation Service of the Department
of Agriculture and the Bureau of Reclamation of
the Department of the Interior. Such regulations
shall include a list of individuals or organiza-
tions qualified to make such certification.
‘‘(B) WATER CONSERVATION SYSTEM.—The
term ‘water conservation system’ means, with re-
spect to farm land—
‘‘(i) new or replacement irrigation
equipment and machinery, including sprin-
klers, pipes, siphons, nozzles, pumps, mo-
tors, and engines, and
‘‘(ii) computer systems for irrigation
and water management.
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‘‘(C) FARM LAND.—The term ‘farm land’
means land used in a trade or business by the
taxpayer or a tenant of the taxpayer for—
‘‘(i) the production of crops, fruits, or
other agricultural products,
‘‘(ii) the raising, harvesting, or grow-
ing of trees, or
‘‘(iii) the sustenance of livestock.
‘‘(d) YEAR EXPENDITURE MADE.—For purposes of
this section, an expenditure with respect to a water con-
servation system shall be treated as made when the original
installation of the system is completed.
‘‘(e) LIMITATION BASED ON AMOUNT OF TAX.—
‘‘(1) LIABILITY FOR TAX.—The credit allowable
under subsection (a) for any taxable year shall not
exceed the excess (if any) of—
‘‘(A) the regular tax for the taxable year, re-
duced by the sum of the credits allowable under
subpart A and the preceding sections of this sub-
part, over
‘‘(B) the tentative minimum tax for the tax-
able year.
‘‘(2) CARRYFORWARD
OF
UNUSED
CREDIT.—If
the amount of the credit allowable under subsection
(a) for any taxable year exceeds the limitation under
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paragraph (1) for the taxable year, the excess shall be
carried to the succeeding taxable year and added to
the amount allowable as a credit under subsection (a)
for such succeeding taxable year.
‘‘(f) DENIAL
OF DOUBLE BENEFIT.—No deduction
shall be allowed under this chapter with respect to any ex-
pense which is taken into account in determining the credit
under this section, and any increase in the basis of any
property which would (but for this subsection) result from
such expense shall be reduced by the amount of credit al-
lowed under this section for such expense.
‘‘(g) TERMINATION.—This section shall not apply to
amounts paid or incurred with respect any water conserva-
tion system the installation of which is completed after De-
cember 31, 2006.’’.
(b) TECHNICAL AMENDMENT.—Subsection (a) of sec-
tion 1016, as amended by this Act, is amended by striking
‘‘and’’ at the end of paragraph (30), by striking the period
at the end of paragraph (31) and inserting ‘‘; and’’, and
by adding at the end the following new paragraph:
‘‘(32) to the extent provided in section 30B(f), in
the case of amounts with respect to which a credit has
been allowed under section 30B.’’.
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(c) CLERICAL AMENDMENT.—The table of sections for
subpart B of part IV of subchapter A of chapter 1 is amend-
ed by adding at the end the following new item:
‘‘Sec. 30B. Purchase and installation of agricultural water con-
servation systems.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to amounts paid or incurred after the
date of the enactment of this Act with respect any water
conservation system the installation of which is completed
after December 31, 2004.
SEC. 659. MODIFICATION OF INVOLUNTARY CONVERSION
RULES FOR BUSINESSES AFFECTED BY THE
SEPTEMBER 11TH TERRORIST ATTACKS.
(a) IN GENERAL.—Subsection (g) of section 1400L is
amended to read as follows:
‘‘(g) MODIFICATION OF RULES APPLICABLE TO NON-
RECOGNITION OF GAIN.—In the case of property which is
compulsorily or involuntarily converted as a result of the
terrorist attacks on September 11, 2001, in the New York
Liberty Zone—
‘‘(1) which was held by a corporation which is
a member of an affiliated group filing a consolidated
return, such corporation shall be treated as satisfying
the purchase requirement of section 1033(a)(2) with
respect to such property to the extent such require-
ment is satisfied by another member of the group, and
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‘‘(2) notwithstanding subsections (g) and (h) of
section 1033, clause (i) of section 1033(a)(2)(B) shall
be applied by substituting ‘5 years’ for ‘2 years’ with
respect to property which is compulsorily or involun-
tarily converted as a result of the terrorist attacks on
September 11, 2001, in the New York Liberty Zone
but only if substantially all of the use of the replace-
ment property is in the City of New York, New
York.’’.
(b) EFFECTIVE DATE.—The amendments made by this
Act shall apply to involuntary conversions occurring on or
after September 11, 2001.
SEC. 660. REPEAL OF APPLICATION OF BELOW-MARKET
LOAN RULES TO AMOUNTS PAID TO CERTAIN
CONTINUING CARE FACILITIES.
(a) IN GENERAL.—Section 7872(c)(1) (relating to
below-market loans to which section applies) is amended—
(1) by striking subparagraph (F), and
(2) by striking ‘‘(C), or (F)’’ in subparagraph
(E) and inserting ‘‘or (C)’’.
(b) FULL EXCEPTION.—Section 7872(g) (relating to
exception for certain loans to qualified continuing care fa-
cilities) is amended—
(1) by striking ‘‘made by a lender to a qualified
continuing care facility pursuant to a continuing
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care contract’’ in paragraph (1) and inserting ‘‘owed
by a facility which on the last day of such year is
a qualified continuing care facility, if such loan was
made pursuant to a continuing care contract and’’,
(2) by striking ‘‘increased personal care services
or’’ in paragraph (3)(C),
(3) by adding at the end of paragraph (3) the
following new flush sentence:
‘‘The Secretary shall issue guidance which limits such
term to contracts which provide to an individual or
individual’s spouse only facilities, care, and services
described in this paragraph which are customarily of-
fered by continuing care facilities.’’,
(4) by inserting ‘‘independent living unit’’ after
‘‘all of the’’ in paragraph (4)(A)(ii),
(5) by striking paragraphs (2) and (5),
(6) by redesignating paragraphs (3) and (4) as
paragraphs (2) and (3), respectively, and
(7) by striking ‘‘CERTAIN’’ in the heading there-
of.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to calendar years beginning after 2004.
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SEC. 661. GOLD, SILVER, PLATINUM, AND PALLADIUM
TREATED IN THE SAME MANNER AS STOCKS
AND BONDS FOR MAXIMUM CAPITAL GAINS
RATE FOR INDIVIDUALS.
(a) IN GENERAL.—Section 1(h)(5) (relating to defini-
tion of collectibles gain and loss) is amended—
(1) by striking ‘‘(as defined in section 408(m)
without regard to paragraph (3) thereof)’’ in subpara-
graph (A) thereof, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(C) COLLECTIBLE.—For purposes of this
paragraph, the term ‘collectible’ has the meaning
given such term by section 408(m), except that
in applying paragraph (3)(B) thereof the deter-
mination of whether any bullion is excluded
from treatment as a collectible shall be made
without regard to the person who is in physical
possession of the bullion.’’
(b) EFFECTIVE DATE.—The amendments made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2003.
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SEC. 662. INCLUSION OF PRIMARY AND SECONDARY MED-
ICAL 
STRATEGIES 
FOR 
CHILDREN 
AND
ADULTS WITH SICKLE CELL DISEASE AS MED-
ICAL ASSISTANCE UNDER THE MEDICAID
PROGRAM.
(a) OPTIONAL MEDICAL ASSISTANCE.—
(1) IN GENERAL.—Section 1905 of the Social Se-
curity Act (42 U.S.C. 1396d) is amended—
(A) in subsection (a)—
(i) by striking ‘‘and’’ at the end of
paragraph (26);
(ii) by redesignating paragraph (27)
as paragraph (28); and
(iii) by inserting after paragraph (26),
the following:
‘‘(27) subject to subsection (x), primary and sec-
ondary medical strategies and treatment and services
for individuals who have Sickle Cell Disease; and’’;
and
(B) by adding at the end the following:
‘‘(x) For purposes of subsection (a)(27), the strategies,
treatment, and services described in that subsection include
the following:
‘‘(1) 
Chronic 
blood 
transfusion 
(with
deferoxamine chelation) to prevent stroke in individ-
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uals with Sickle Cell Disease who have been identified
as being at high risk for stroke.
‘‘(2) Genetic counseling and testing for individ-
uals with Sickle Cell Disease or the sickle cell trait
to allow health care professionals to treat such indi-
viduals and to prevent symptoms of Sickle Cell Dis-
ease.
‘‘(3) Other treatment and services to prevent in-
dividuals who have Sickle Cell Disease and who have
had a stroke from having another stroke.’’.
(2) RULE OF CONSTRUCTION.—Nothing in sub-
sections (a)(27) or (x) of section 1905 of the Social
Security Act (42 U.S.C. 1396d), as added by para-
graph (1), shall be construed as implying that a State
medicaid program under title XIX of such Act could
not have treated, prior to the date of enactment of this
Act, any of the primary and secondary medical strat-
egies and treatment and services described in such
subsections as medical assistance under such pro-
gram, including as early and periodic screening, di-
agnostic, and treatment services under section 1905(r)
of such Act.
(b) FEDERAL REIMBURSEMENT FOR EDUCATION AND
OTHER SERVICES RELATED
TO
THE PREVENTION
AND
TREATMENT
OF
SICKLE
CELL
DISEASE.—Section
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1903(a)(3) of the Social Security Act (42 U.S.C.
1396b(a)(3)) is amended—
(1) in subparagraph (D), by striking ‘‘plus’’ at
the end and inserting ‘‘and’’; and
(2) by adding at the end the following:
‘‘(E) 50 percent of the sums expended with
respect to costs incurred during such quarter as
are attributable to providing—
‘‘(i) services to identify and educate in-
dividuals who are likely to be eligible for
medical assistance under this title and who
have Sickle Cell Disease or who are carriers
of the sickle cell gene, including education
regarding how to identify such individuals;
or
‘‘(ii) education regarding the risks of
stroke and other complications, as well as
the prevention of stroke and other complica-
tions, in individuals who are likely to be el-
igible for medical assistance under this title
and who have Sickle Cell Disease; plus’’.
(c) DEMONSTRATION PROGRAM FOR THE DEVELOP-
MENT AND ESTABLISHMENT OF SYSTEMIC MECHANISMS
FOR THE PREVENTION AND TREATMENT OF SICKLE CELL
DISEASE.—
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(1) AUTHORITY
TO
CONDUCT
DEMONSTRATION
PROGRAM.—
(A) 
IN
GENERAL.—The 
Administrator,
through the Bureau of Primary Health Care and
the Maternal and Child Health Bureau, shall
conduct a demonstration program by making
grants to up to 40 eligible entities for each fiscal
year in which the program is conducted under
this section for the purpose of developing and es-
tablishing systemic mechanisms to improve the
prevention and treatment of Sickle Cell Disease,
including through—
(i) the coordination of service delivery
for individuals with Sickle Cell Disease;
(ii) genetic counseling and testing;
(iii) bundling of technical services re-
lated to the prevention and treatment of
Sickle Cell Disease;
(iv) training of health professionals;
and
(v) identifying and establishing other
efforts related to the expansion and coordi-
nation of education, treatment, and con-
tinuity of care programs for individuals
with Sickle Cell Disease.
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(B) GRANT AWARD REQUIREMENTS.—
(i) GEOGRAPHIC DIVERSITY.—The Ad-
ministrator shall, to the extent practicable,
award grants under this section to eligible
entities located in different regions of the
United States.
(ii) PRIORITY.—In awarding grants
under this subsection, the Administrator
shall give priority to awarding grants to el-
igible entities that are—
(I) Federally-qualified health cen-
ters that have a partnership or other
arrangement with a comprehensive
Sickle Cell Disease treatment center
that does not receive funds from the
National Institutes of Health; or
(II) 
Federally-qualified 
health
centers that intend to develop a part-
nership or other arrangement with a
comprehensive 
Sickle 
Cell 
Disease
treatment center that does not receive
funds from the National Institutes of
Health.
(2) ADDITIONAL
REQUIREMENTS.—An eligible
entity awarded a grant under this subsection shall
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use funds made available under the grant to carry
out, in addition to the activities described in para-
graph (1)(A), the following activities:
(A) To facilitate and coordinate the delivery
of education, treatment, and continuity of care
for individuals with Sickle Cell Disease under—
(i) the entity’s collaborative agreement
with a community-based Sickle Cell Disease
organization or a nonprofit entity that
works with individuals who have Sickle Cell
Disease;
(ii) the Sickle Cell Disease newborn
screening program for the State in which
the entity is located; and
(iii) the maternal and child health
program under title V of the Social Secu-
rity Act (42 U.S.C. 701 et seq.) for the
State in which the entity is located.
(B) To train nursing and other health staff
who provide care for individuals with Sickle Cell
Disease.
(C) To enter into a partnership with adult
or pediatric hematologists in the region and
other regional experts in Sickle Cell Disease at
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tertiary and academic health centers and State
and county health offices.
(D) To identify and secure resources for en-
suring reimbursement under the medicaid pro-
gram, State children’s health insurance program,
and other health programs for the prevention
and treatment of Sickle Cell Disease.
(3) NATIONAL COORDINATING CENTER.—
(A) ESTABLISHMENT.—The Administrator
shall enter into a contract with an entity to
serve as the National Coordinating Center for the
demonstration program conducted under this
subsection.
(B) ACTIVITIES DESCRIBED.—The National
Coordinating Center shall—
(i) collect, coordinate, monitor, and
distribute data, best practices, and findings
regarding the activities funded under grants
made to eligible entities under the dem-
onstration program;
(ii) develop a model protocol for eligi-
ble entities with respect to the prevention
and treatment of Sickle Cell Disease;
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(iii) develop educational materials re-
garding the prevention and treatment of
Sickle Cell Disease; and
(iv) prepare and submit to Congress a
final report that includes recommendations
regarding the effectiveness of the demonstra-
tion program conducted under this sub-
section and such direct outcome measures
as—
(I) the number and type of health
care resources utilized (such as emer-
gency room visits, hospital visits,
length of stay, and physician visits for
individuals with Sickle Cell Disease);
and
(II) the number of individuals
that were tested and subsequently re-
ceived genetic counseling for the sickle
cell trait.
(4) APPLICATION.—An eligible entity desiring a
grant under this subsection shall submit an applica-
tion to the Administrator at such time, in such man-
ner, and containing such information as the Admin-
istrator may require.
(5) DEFINITIONS.—In this subsection:
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(A) ADMINISTRATOR.—The term ‘‘Adminis-
trator’’ means the Administrator of the Health
Resources and Services Administration.
(B) ELIGIBLE ENTITY.—The term ‘‘eligible
entity’’ means a Federally-qualified health cen-
ter, a nonprofit hospital or clinic, or a univer-
sity health center that provides primary health
care, that—
(i) has a collaborative agreement with
a community-based Sickle Cell Disease or-
ganization or a nonprofit entity with expe-
rience in working with individuals who
have Sickle Cell Disease; and
(ii) demonstrates to the Administrator
that either the Federally-qualified health
center, the nonprofit hospital or clinic, the
university health center, the organization or
entity described in clause (i), or the experts
described in paragraph (2)(C), has at least
5 years of experience in working with indi-
viduals who have Sickle Cell Disease.
(C) FEDERALLY-QUALIFIED
HEALTH
CEN-
TER.—The term ‘‘Federally-qualified health cen-
ter’’ has the meaning given that term in section
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1905(l)(2)(B) of the Social Security Act (42
U.S.C. 1396d(l)(2)(B)).
(6) AUTHORIZATION
OF
APPROPRIATIONS.—
There is authorized to be appropriated to carry out
this subsection, $10,000,000 for each of fiscal years
2005 through 2009.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) take effect on the date of enactment
of this Act and apply to medical assistance and services
provided under title XIX of the Social Security Act (42
U.S.C. 1396 et seq.) on or after that date.
Subtitle F—Revenue Provisions
PART I—GENERAL REVENUE PROVISIONS
SEC. 661A. TREASURY REGULATIONS ON FOREIGN TAX
CREDIT.
Section 901, as amended by this Act, is amended by
redesignating subsection (m) as subsection (n) and by in-
serting after subsection (l) the following new subsection:
‘‘(m) REGULATIONS.—The Secretary may prescribe
regulations disallowing a credit under subsection (a) for all
or a portion of any foreign tax, or allocating a foreign tax
among 2 or more persons, in cases where the foreign tax
is imposed on any person in respect of income of another
person or in other cases involving the inappropriate separa-
tion of the foreign tax from the related foreign income.’’.
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SEC. 662B. FREEZE OF PROVISIONS REGARDING SUSPEN-
SION OF INTEREST WHERE SECRETARY FAILS
TO CONTACT TAXPAYER.
(a) IN GENERAL.—Section 6404(g) (relating to sus-
pension of interest and certain penalties where Secretary
fails to contact taxpayer) is amended by striking ‘‘1-year
period (18-month period in the case of taxable years begin-
ning before January 1, 2004)’’ both places it appears and
inserting ‘‘18-month period’’.
(b) EXCEPTION FOR GROSS MISSTATEMENT.—Section
6404(g)(2) (relating to exceptions) is amended by striking
‘‘or’’ at the end of subparagraph (C), by redesignating sub-
paragraph (D) as subparagraph (E), and by inserting after
subparagraph (C) the following new subparagraph:
‘‘(D) any interest, penalty, addition to tax,
or additional amount with respect to any gross
misstatement; or’’.
(c) EXCEPTION FOR LISTED AND REPORTABLE TRANS-
ACTIONS.—Section 6404(g)(2) (relating to exceptions), as
amended by subsection (b), is amended by striking ‘‘or’’ at
the end of subparagraph (D), by redesignating subpara-
graph (E) as subparagraph (F), and by inserting after sub-
paragraph (D) the following new subparagraph:
‘‘(E) any interest, penalty, addition to tax,
or additional amount with respect to any report-
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able transaction or listed transaction (as defined
in 6707A(c)); or’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to taxable years beginning after December 31,
2003.
(2) EXCEPTION
FOR
REPORTABLE
OR
LISTED
TRANSACTIONS.—The amendments made by sub-
section (c) shall apply with respect to interest accru-
ing after May 5, 2004.
PART II—PENSION AND DEFERRED
COMPENSATION
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 RECEIPT.—
‘‘(1) IN GENERAL.—
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‘‘(A) GROSS INCOME INCLUSION.—If at any
time during a taxable year a nonqualified de-
ferred compensation plan—
‘‘(i) fails to meet the requirements of
paragraphs (2), (3), (4), and (5), or
‘‘(ii) is not operated in accordance
with such requirements,
all compensation deferred under the plan for the
taxable year and all preceding taxable years
shall be includible in gross income for the taxable
year to the extent not subject to a substantial
risk of forfeiture and not previously included in
gross income.
‘‘(B) INTEREST AND ADDITIONAL TAX PAY-
ABLE WITH RESPECT TO PREVIOUSLY DEFERRED
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 the tax-
able year of inclusion shall be increased by
the sum of—
‘‘(I) the amount of interest deter-
mined under clause (ii), and
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‘‘(II) an amount equal to 10 per-
cent of the compensation which is re-
quired to be included in gross income.
‘‘(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 on the underpayments 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
compensation 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
compensation deferred under the plan may not
be distributed earlier than—
‘‘(i) except as provided in subpara-
graph (B)(i), separation from service (as
determined by the Secretary),
‘‘(ii) the date the participant becomes
disabled (within the meaning of subpara-
graph (C)),
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‘‘(iii) death,
‘‘(iv) a specified time (or pursuant to
a fixed schedule) specified under the plan as
of the date of the deferral of such compensa-
tion,
‘‘(v) to the extent provided by the Sec-
retary, a change in the ownership or effec-
tive control of the corporation, or in the
ownership of a substantial portion of the as-
sets of the corporation, or
‘‘(vi) the occurrence of an unforeseeable
emergency.
‘‘(B) SPECIAL RULES.—
‘‘(i) SEPARATION
FROM
SERVICE
OF
SPECIFIED
EMPLOYEES.—In the case of
specified employees, the requirement of sub-
paragraph (A)(i) is met only if distribu-
tions may not be made earlier than 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.
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‘‘(ii) CHANGES IN OWNERSHIP OR CON-
TROL.—In the case of a participant who is
subject to the requirements of section 16(a)
of the Securities Exchange Act of 1934, the
requirement of subparagraph (A)(v) is met
only if distributions may not be made ear-
lier than 1 year after the date of the change
in ownership or effective control.
‘‘(iii) UNFORESEEABLE EMERGENCY.—
For purposes of subparagraph (A)(vi)—
‘‘(I) IN GENERAL.—The term ‘un-
foreseeable emergency’ means a severe
financial hardship to the participant
or beneficiary resulting from a sudden
and unexpected illness or accident of
the participant or beneficiary, the par-
ticipant’s or beneficiary’s spouse, or
the participant’s or beneficiary’s de-
pendent (as defined in section 152(a)),
loss of the participant’s or beneficiary’s
property due to casualty, or other
similar extraordinary and unforesee-
able circumstances arising as a result
of events beyond the control of the par-
ticipant or beneficiary.
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‘‘(II) LIMITATION
ON
DISTRIBU-
TIONS.—The requirement of subpara-
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 compensation by in-
surance or otherwise or by liquidation
of the participant’s or beneficiary’s as-
sets (to the extent the liquidation of
such assets would not itself cause severe
financial hardship).
‘‘(C) DISABLED.—For purposes of subpara-
graph (A)(ii), a participant shall be considered
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
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in death or can be expected to last for a
continuous period of not less than 12
months, or
‘‘(ii) is, by reason of any medically de-
terminable physical or mental impairment
which can be expected to result in death or
can be expected to last for a continuous pe-
riod of not less than 12 months, receiving
income replacement benefits for a period of
not less than 3 months under an accident
and health plan covering employees of the
participant’s employer.
‘‘(3) INVESTMENT
OPTIONS.—The requirements
of this paragraph are met if the plan provides that
the investment options a participant may elect under
the plan—
‘‘(A) are comparable to the investment op-
tions which a participant may elect under the
defined contribution plan of the employer
which—
‘‘(i) meets the requirement of section
401(a) and includes a trust exempt from
taxation under section 501(a), and
‘‘(ii) has the fewest investment options,
or
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‘‘(B) if there is no such defined contribution
plan, meet such requirements as the Secretary
may prescribe (including requirements limiting
such options to permissible investment options
specified by the Secretary).
‘‘(4) ACCELERATION OF BENEFITS.—The require-
ments of this paragraph are met if the plan does not
permit the acceleration of the time or schedule of any
payment under the plan, except as provided by the
Secretary in regulations.
‘‘(5) ELECTIONS.—
‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met if the requirements of
subparagraphs (B) and (C) are met.
‘‘(B) INITIAL
DEFERRAL
DECISION.—The
requirements of this subparagraph are met if the
plan provides that compensation for services per-
formed during a taxable year may be deferred at
the participant’s election only if the election to
defer such compensation is made during the pre-
ceding taxable year or at such other time as pro-
vided in regulations. In the case of the first year
in which a participant becomes eligible to par-
ticipate in the plan, such election may be made
with respect to services to be performed subse-
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quent to the election within 30 days after the
date the participant becomes eligible to partici-
pate 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
payment—
‘‘(i) the plan requires that such election
may not take effect until at least 12 months
after the date on which the election 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 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 paragraph.
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A plan shall be treated as failing to meet the re-
quirements of this subparagraph if the plan per-
mits more than 1 subsequent election to delay
any payment.
‘‘(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 Sec-
retary) for purposes of paying deferred compensation
under a nonqualified deferred compensation plan,
such assets shall be treated for purposes of section 83
as property transferred in connection with the per-
formance 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.
This paragraph shall not apply to assets located in
a foreign jurisdiction if substantially all of the serv-
ices to which the nonqualified deferred compensation
relates are performed in such jurisdiction.
‘‘(2) EMPLOYER’S FINANCIAL HEALTH.—In the
case of a nonqualified deferred compensation plan,
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there is a transfer of property within the meaning of
section 83 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 tax-
able year that assets treated as transferred under this
subsection remain set aside in a trust or other ar-
rangement subject to paragraph (1) or (2), any in-
crease 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 pre-
viously 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
of paragraph (1) or (2) for a taxable year, the
tax imposed by this chapter for such taxable year
shall be increased by the sum of—
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‘‘(i) the amount of interest determined
under subparagraph (B), and
‘‘(ii) an amount equal to 10 percent of
the amounts required to be included in gross
income.
‘‘(B) INTEREST.—For purposes of subpara-
graph (A), the interest determined under this
subparagraph for any taxable year is the
amount of interest at the underpayment rate on
the underpayments that would have occurred had
the amounts so required to be included in gross
income 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 amounts are not subject to a substan-
tial risk of forfeiture.
‘‘(c) NO INFERENCE
ON EARLIER INCOME INCLU-
SION.—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 in-
cluded in gross income under this section shall not be re-
quired to be included in gross income under any other pro-
vision of this chapter or any other rule of law later than
the time provided in this section.
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‘‘(d) OTHER DEFINITIONS AND SPECIAL RULES.—For
purposes of this section—
‘‘(1) NONQUALIFIED DEFERRED COMPENSATION
PLAN.—The term ‘nonqualified deferred compensation
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 arrangement,
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 to
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such compensation are conditioned upon the future
performance of substantial services by any individual.
‘‘(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.
‘‘(6) EXCEPTION FOR NONELECTIVE DEFERRED
COMPENSATION.—This section shall not apply to any
nonelective deferred compensation to which section
457 does not apply by reason of section 457(e)(12),
but only if such compensation is provided under a
nonqualified deferred compensation plan which was
in existence on May 1, 2004, and which was pro-
viding nonelective deferred compensation described in
section 457(e)(12) on such date. If, after May 1, 2004,
a plan described in the preceding sentence adopts a
plan amemdment which provides a material change
in the classes of individuals eligible to participate in
the plan, this paragraph shall not apply to any non-
elective deferred compensation provided under the
plan on or after the date of the adoption of the
amendment.
‘‘(e) REGULATIONS.—The Secretary shall prescribe
such regulations as may be necessary or appropriate to
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carry out the purposes of this section, including
regulations—
‘‘(1) providing for the determination of amounts
of deferral in the case of a nonqualified deferred com-
pensation 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
‘‘(5) disregarding a substantial risk of forfeiture
in cases where necessary to carry out the purposes of
this section.’’.
(b) APPLICATION OF GOLDEN PARACHUTE PAYMENT
PROVISIONS.—Section 280G of such Code (relating to gold-
en parachute payments) is amended by redesignating sub-
section (e) as subsection (f) and by inserting after subsection
(d) the following new subsection:
‘‘(e) SPECIAL RULES FOR CERTAIN PAYMENTS FROM
NONQUALIFIED DEFERRED COMPENSATION PLANS.—
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‘‘(1) IN GENERAL.—Notwithstanding any other
provision of this section, an applicable payment shall
be treated as an excess parachute payment for pur-
poses of this section and section 4999.
‘‘(2) COORDINATION WITH OTHER PAYMENTS.—
‘‘(A) APPLICABLE
PAYMENTS
WHICH
ARE
PARACHUTE PAYMENTS.—If any applicable pay-
ment is a parachute payment (determined with-
out regard to subsection (b)(2)(A)(ii))—
‘‘(i) except as provided in paragraph
(4), this section shall be applied to such
payment in the same manner as if this sub-
section had not been enacted, and
‘‘(ii) if such application results in an
excess parachute payment, any tax under
section 4999 on the excess parachute pay-
ment shall be in addition to the tax im-
posed by reason of paragraph (1).
‘‘(B) APPLICABLE
PAYMENTS
WHICH
ARE
NOT
PARACHUTE
PAYMENTS.—An applicable
payment not described in subparagraph (A)
shall be taken into account in determining
whether any payment described in subparagraph
(A) or any payment which is not an applicable
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payment is a parachute payment under sub-
section (b)(2).
‘‘(3) APPLICABLE
PAYMENT.—For purposes of
this subsection, the term ‘applicable payment’ means
any distribution (including any distribution treated
as a parachute payment without regard to this sub-
section) from a nonqualified deferred compensation
plan (as defined in section 409A(d)) which is made—
‘‘(A) to a participant who is subject to the
requirements of section 16(a) of the Securities
Exchange Act of 1934, and
‘‘(B) during the 1-year period following a
change in the ownership or effective control of
the corporation or in the ownership of a substan-
tial portion of the assets of the corporation.
Such terms shall not include any distribution by rea-
son of the death of the participant or the participant
becoming disabled (within the meaning of section
409A(a)(2)(C)).
‘‘(4) NO DOUBLE COUNTING.—Under regulations,
proper adjustments shall be made in the application
of this subsection to prevent a deduction from being
disallowed more than once.’’.
(c) W–2 FORMS.—
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(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 strik-
ing the period at the end of paragraph (12) and in-
serting ‘‘, and’’, and by inserting after paragraph
(12) the following new paragraph:
‘‘(13) the total amount of deferrals under a non-
qualified 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 para-
graph (13), the Secretary may (by regulation) estab-
lish a minimum amount of deferrals below which
paragraph (13) does not apply.’’.
(d) CONFORMING AND CLERICAL AMENDMENTS.—
(1) Section 414(b) is amended by inserting
‘‘409A,’’ after ‘‘408(p),’’.
(2) Section 414(c) is amended by inserting
‘‘409A,’’ after ‘‘408(p),’’.
(3) The table of sections for such subpart A 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.’’.
(e) EFFECTIVE DATE.—
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(1) IN
GENERAL.—The amendments made by
this section shall apply to amounts deferred in tax-
able years beginning after December 31, 2004.
(2) EARNINGS ATTRIBUTABLE TO AMOUNT PRE-
VIOUSLY DEFERRED.—The amendments made by this
section shall apply to earnings on deferred compensa-
tion only to the extent that such amendments apply
to such compensation.
(f) GUIDANCE RELATING TO CHANGE OF OWNERSHIP
OR CONTROL.—Not later than 90 days after the date of the
enactment of this Act, the Secretary of the Treasury shall
issue guidance on what constitutes a change in ownership
or effective control for purposes of section 409A of the Inter-
nal Revenue Code of 1986, as added by this section.
(g) 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 on or before
December 31, 2004, may, without violating the require-
ments of paragraphs (2), (3), (4), and (5) of section 409A(a)
of the Internal Revenue Code of 1986 (as added by this sec-
tion), terminate participation or cancel an outstanding de-
ferral election with regard to amounts earned after Decem-
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ber 31, 2004, if such amounts are includible in income as
earned.
SEC. 672. PROHIBITION ON DEFERRAL OF GAIN FROM THE
EXERCISE 
OF 
STOCK 
OPTIONS 
AND 
RE-
STRICTED 
STOCK 
GAINS 
THROUGH 
DE-
FERRED COMPENSATION ARRANGEMENTS.
(a) IN GENERAL.—Section 83 (relating to property
transferred in connection with performance of services) is
amending by adding at the end the following new sub-
section:
‘‘(i) 
PROHIBITION
ON
ADDITIONAL
DEFERRAL
THROUGH DEFERRED COMPENSATION ARRANGEMENTS.—
If a taxpayer exchanges—
‘‘(1) an option to purchase employer securities—
‘‘(A) to which subsection (a) applies, or
‘‘(B) which is described in subsection (e)(3),
or
‘‘(2) employer securities or any other property
based on employer securities transferred to the tax-
payer,
for a right to receive future payments, then, notwith-
standing any other provision of this title, there shall be in-
cluded in gross income for the taxable year of the exchange
an amount equal to the present value of such right (or such
other amount as the Secretary may by regulations specify).
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For purposes of this subsection, the term ‘employer securi-
ties’ includes any security issued by the employer.’’.
(b) CONTROLLED GROUP RULES.—Section 414(t)(2) is
amended by inserting ‘‘83(i),’’ after ‘‘79,’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to any exchange after December 31,
2004.
SEC. 673. INCREASE IN WITHHOLDING FROM SUPPLE-
MENTAL WAGE PAYMENTS IN EXCESS OF
$1,000,000.
(a) IN GENERAL.—If an employer elects under Treas-
ury Regulation 31.3402(g)–1 to determine the amount to
be deducted and withheld from any supplemental wage pay-
ment by using a flat percentage rate, the rate to be used
in determining the amount to be so deducted and withheld
shall not be less than 28 percent (or the corresponding rate
in effect under section 1(i)(2) of the Internal Revenue Code
of 1986 for taxable years beginning in the calendar year
in which the payment is made).
(b) SPECIAL RULE FOR LARGE PAYMENTS.—
(1) IN
GENERAL.—Notwithstanding subsection
(a), if the supplemental wage payment, when added
to all such payments previously made by the employer
to the employee during the calendar year, exceeds
$1,000,000, the rate used with respect to such excess
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shall be equal to the maximum rate of tax in effect
under section 1 of such Code for taxable years begin-
ning in such calendar year.
(2) AGGREGATION.—All persons treated as a sin-
gle employer under subsection (a) or (b) of section 52
of the Internal Revenue Code of 1986 shall be treated
as a single employer for purposes of this subsection.
(c) CONFORMING AMENDMENT.—Section 13273 of the
Revenue Reconciliation Act of 1993 (Public Law 103–66)
is repealed.
(d) EFFECTIVE DATE.—The provisions of, and the
amendment made by, this section shall apply to payments
made after December 31, 2003.
SEC. 674. TREATMENT OF SALE OF STOCK ACQUIRED PUR-
SUANT TO EXERCISE OF STOCK OPTIONS TO
COMPLY WITH CONFLICT-OF-INTEREST RE-
QUIREMENTS.
(a) IN GENERAL.—Section 421 of the Internal Revenue
Code of 1986 (relating to general rules for certain stock op-
tions) is amended by adding at the end the following new
subsection:
‘‘(d) CERTAIN SALES TO COMPLY WITH CONFLICT-OF-
INTEREST REQUIREMENTS.—If—
‘‘(1) a share of stock is transferred to an eligible
person (as defined in section 1043(b)(1)) pursuant to
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(b) MODIFICATIONS TO EXTENSION OF DEDUCTION
FOR CERTAIN REFUELING PROPERTY.—Subsection (f) of
section 179A is amended to read as follows:
‘‘(f) TERMINATION.—This section shall not apply to
any property placed in service—
‘‘(1) in the case of property relating to hydrogen,
after December 31, 2011, and
‘‘(2) in the case of any other property, after De-
cember 31, 2007.’’.
(c) INCENTIVE FOR PRODUCTION OF HYDROGEN AT
QUALIFIED
CLEAN-FUEL
VEHICLE
REFUELING
PROP-
ERTY.—Section 179A(d) (defining qualified clean-fuel vehi-
cle refueling property) is amended by adding at the end
the following new flush sentence:
‘‘In the case of clean-burning fuel which is hydrogen pro-
duced from another clean-burning fuel, paragraph (3)(A)
shall be applied by substituting ‘production, storage, or dis-
pensing’ for ‘storage or dispensing’ both places it appears.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 1016(a), as amended by this Act, is
amended by striking ‘‘and’’ at the end of paragraph
(32), by striking the period at the end of paragraph
(33) and inserting ‘‘, and’’, and by adding at the end
the following new paragraph:
‘‘(34) to the extent provided in section 30D(f).’’.
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product to 1 or more other commercially mar-
keted tobacco products shall compare the tobacco
product to a commercially marketed tobacco
product that is representative of that type of to-
bacco product on the market (for example the av-
erage value of the top 3 brands of an established
regular tobacco product).
‘‘(B) QUANTITATIVE
COMPARISONS.—The
Secretary may also require, for purposes of sub-
paragraph (A), that the percent (or fraction) of
change and identity of the reference tobacco
product and a quantitative comparison of the
amount of the substance claimed to be reduced
shall be stated in immediate proximity to the
most prominent claim.
‘‘(3) LABEL DISCLOSURE.—
‘‘(A) IN GENERAL.—The Secretary may re-
quire the disclosure on the label of other sub-
stances in the tobacco product, or substances that
may be produced by the consumption of that to-
bacco product, that may affect a disease or
health-related condition or may increase the risk
of other diseases or health-related conditions as-
sociated with the use of tobacco products.